RAB Capital sued in the UK High Court this week demanding the return of $50m held by Lehman on behalf of one of its funds.

RAB and others are trying to recover $40bn of assets frozen when Lehman collapsed last week.

PwC, the administrators, disclosed that they believed the bankâ??s prime brokerage had used about $22bn of the collateral held in trades for its own cash-raising operations in a practice known as rehypothecation. This allows the prime broker to re-lend client securities held as collateral.

RAB argues that they had put in place legal agreements with the bank preventing rehypothecation. Other hedge funds are furious that the administrator has not yet returned money held in segregated client accounts. It is expected that there will be a series of similar legal actions against administrators of Lehman Brothers in the coming weeks and months.

The collapse has already forced the suspension of several hedge funds who have been caught with no access to their assets.