Hedge Funds Earn $2 Billion By Dumping PG&E Stock As Fire Survivors Are Left Short-Changed

SAN FRANCISCO (CBS SF) -- While fire survivors continue to await promised compensation from Pacific Gas & Electric Company, Wall Street hedge funds received a hefty payout.

A KQED and the California Newsroom report found that 20 hedge funds dumped 250 million shares of PG&E. The hedge funds grossed, at minimum, a $2 billion payout by dumping the PG&E stock.

Towards the end of PG&E bankruptcy, a historic arrangement was made. The company gave hedge funds 169 billion shares to ensure that the hedge funds would step up to buy more stock if no one else did. KQED reporter Lily Jamali says those shares are worth $1.5 billion, and hedge funds did not pay a cent for them.

"As we're seeing these hedge funds cashing out, bailing out of their holdings in the company, that's going to have an impact on the compensation of these fire survivors," said Jamali.

Approximately 70,000 fire survivors, who lost some of their most precious possessions, are directly affected by the hedge funds choice to sell-off their shares. Fire survivors hold close to 500 million shares, but because of the stock being dumped there is downward pressure on the share price. The return that victims expect is dramatically lower than what was promised.

"The $13.5 billion settlement that these victims were promised has never been worth that." Jamali said.

Although the stock has been doing fairly well, PG&E are still more than a billion dollars short in their payout to survivors.