Western Asset ($WACSX) Core Bond Fund Deception and SEC Investigation Case

Court: W.D. Pennsylvania

Case: 2:25-cv-00937

• WWACSX investors filed a claim against Western Asset Management, Franklin Resources, and portfolio manager Stephen Kenneth Leech for secretly diverting profitable trades to insider-linked funds while burdening Core Bond investors with the losses—misrepresenting allocation fairness and violating fiduciary duties.
• Following exposure of the scheme and an SEC enforcement action, Western Asset agreed to pay $10 million in penalties. The cherry-picking strategy generated over $600 million in illicit gains for favored funds, while Core Bond and Core Plus investors absorbed equivalent losses.
• WWACSX investors can join this case to be notified about potential recovery.

Case Details:

Between January 1, 2021 and October 31, 2023, Western Asset marketed its fixed-income products—particularly the Core Bond Fund WWACSX—as managed with “fair and equitable” trade allocation policies. In reality, portfolio manager Stephen Leech ran a cherry-picking scheme that fraudulently benefited the Western Asset Macro Opportunities Fund (“Macro Opps”), where he had a personal interest.

Using post-trade allocation, Leech assigned winning trades to Macro Opps and shifted losing trades to Core Bond and Core Plus accounts. Macro Opps reported a 34-month winning streak—while Core Bond investors suffered consistent underperformance.

On June 28, 2023, the SEC filed a parallel action against Leech and Western Asset, revealing that over 90% of high-return trades went to Macro Opps and over 90% of high-loss trades were funneled to Core Bond strategies. Western Asset settled the charges without admitting wrongdoing.

Based on these events, WWACSX investors filed a claim alleging that Western Asset:

• Misled investors about fair trade allocation and internal compliance.
• Allowed portfolio managers to manipulate returns to benefit preferred accounts.
• Concealed the cherry-picking scheme and failed to protect Core Bond investors.

Investors believe Western Asset distorted performance and misrepresented its practices to inflate certain fund results at the expense of others.