Hedge funds appeal denial of WaMu bankruptcy plan

DOVER, Del. (AP) - Hedge fund investors that supported Washington Mutual Inc.'s reorganization plan are appealing a Delaware bankruptcy court judge's rejection of it.

The plan is based on the settlement of several lawsuits filed after federal regulators seized WaMu's Seattle-based flagship bank in 2008 and sold its assets to JPMorgan Chase in the nation's largest bank failure ever.

The judge rejected the proposed plan this month for a second time, saying there could be merit to the claims of some equity holders that the hedge funds had traded on inside information they obtained in court. The hedge funds have denied the allegations; they filed notices of appeal on Tuesday.

The judge also said the parties must enter mediation before the equity holders can seek to have the hedge funds' bankruptcy claims disallowed.