Unlike depositors, these investors could not withdraw their funds on demand whenever bad news surfaced.
You might remember that when IndyMac collapsed this summer, you had people lining up to withdraw their funds.
After Sept. 11, U.S. authorities froze the bank accounts of several prominent Saudis, which triggered other wealthy Arabs to withdraw their funds from the United States.
Hundreds of depositors of Sir Allen's Bank of Antigua in Antigua also sought to withdraw their funds on Wednesday, although the bank is separate from SIB.
Those poor folks were told in 2010 that they could not withdraw their funds from HCP even as it was not doing well unless they wished to be paid out in LightSquared stock, now worthless.
But Web Money has been demanding that users verify their identities to withdraw funds.
U.S. investors were betting on Thursday that the Federal Reserve would be forced to cut rates to aid financial markets after a French bank forbade holders of three of its hedge funds to withdraw their money.
To add insult to injury, when seeking to withdraw from certain hedge funds, many investors were told they could not withdraw their monies.
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"As a result of our problems today, some of our customers have gone to our ATMs and they've been able to withdraw more funds than they had in their account and therefore they've overdrawn their account, " spokesman Bryan Fitzgerald told the Australian Broadcasting Corporation.
The next step would be to prime the market by modifying their forward guidance on the federal funds rate while beginning to withdraw reserves from the system.
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Compared with private-equity funds, hedge funds are short-term vehicles from which investors can readily withdraw their capital, usually at least once a year.
Players are required to produce documents to verify their identity, address, and source of funds where relevant, before they are able to withdraw any funds.
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