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

C.D. California

Court

2:26-cv-00246

Case number

01/01/2021

Class period Start

10/31/2023

Class period End

09/02/2025

Lead Plaintiff motion deadline

$WACSX 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.
$WACSX 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 ($WACSX)—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, $WACSX 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.

Case Type

US Securities Class Action

Case Status

Lead Plaintiff Appointment

Alleged Offence

Mismanagement,

Misleading Statements,

Financial Misrepresentation,

Failure to Disclose,

Breach of Fiduciary duty,

Omissions

Suspected Party

Directors,

Management,

Investment Bank,

Service Provider

Security Type

Other

Trade Direction

Long

Shock Event Date

10/31/2023

Filing date

07/03/2025

Lead Plaintiff Deadline

09/02/2025

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