Bermuda-based investment fund late last month is sending tremors through the global fund business.

Daiwa America, a unit of one of Japan's "Big Four'' securities firms, on July 24 seized the $33 million in the account of the RCM Global Long Term Capital Appreciation Fund Ltd. to cover a $35-million loss in a separate account at Daiwa controlled by the fund's manager, Rowayton Capital Management. Rowayton is owned by veteran currency trader Bill Lipschutz.

Since the seizure, some of the funds that own shares of RCM Global have been unable to calculate their net asset value because they can't determine the worth of their RCM Global investment.

That in turn forced them to suspend sales of shares in their funds, and to block existing investors from withdrawing their money, some of the funds' managers said.

Worse yet, the managers say, Daiwa's action threatens to destroy their credibility with investors and even bring on the demise of their funds if enough investors bolt.

"It's outrageous what Daiwa has done,'' said Dion Friedland, chairman of British Virgin Islands-based Magnum Fund Management Ltd. "This could destroy the fund industry worldwide if a broker can grab people's assets.'' Friedland said his company has halted all redemptions and new investment in its Magnum Aggressive Growth fund because it can't value its investment in RCM Global. The Magnum Aggressive Growth fund owns 500 shares of RCM Global, valued at about $550,000 before the seizure by Daiwa, he said.

Like many fund managers, Magnum allows investors to put money into and take money out of its fund only at the end of the month. Magnum couldn't let investors do either at the end of July because of the problems at RCM Global, Friedland said.

Friedland and other managers say Daiwa had no right to seize the assets in RCM Global's account to cover Rowayton's losses because the two accounts have different owners.

Lipschutz, Rowayton's owner, is the investment manager for RCM Global and owns a 3.5 percent stake in it. His wife, Lynnelle Jones, who is the head of marketing at Rowayton, is one of three directors of the RCM Global fund.

Daiwa, in a lawsuit filed the day it seized RCM Global's assets, said it had the right to seize the RCM Global account because Lipschutz had given the brokerage assurances that the accounts -- two of 15 that Lipschutz had at Daiwa -- could be treated as a single account.

Lipschutz "repeatedly assured Daiwa the ownership of the accounts was effectively the same and the accounts could be netted for equity purposes'', Daiwa said in a statement sent to Bloomberg Business News on August 9.

"Daiwa America Corp. has exercised its contractual rights to net and offset a customer account in surplus against an affiliated customer account in deficit,'' Daiwa said.

The company declined to comment on the effects on funds that owned shares in RCM Global.

Daiwa's seizure of RCM Global was a blow to Lipschutz, the former head of global foreign exchange trading at Salomon Brothers who was dubbed the "Sultan of Currencies'' in the 1992 book "The New Market Wizards''.

Lipschutz said he lost the money in Rowayton's account at Daiwa through losing currency trades over the course of a year and a half. Since the seizure by Daiwa last month, Lipschutz has moved his customer accounts out of the securities firm. He said he expects to start trading in those accounts again next week.

Other fund managers with stakes in RCM Global said Daiwa's action could cause the closure of their funds.

"I haven't had a full night's sleep since this happened,'' said Fred Purvis, president and founding shareholder of the Horizon I Multi-Assets Fund in Barbados. "Investor confidence could be decimated by these actions, and (if Daiwa wins) we could suffer redemptions beyond a level where it is economically feasible to carry on.'' About 12 percent of Purvis' $12.5 million fund, which farms out most of its investors' money to other managers, is in RCM Global fund. Horizon has about 600 investors, all Canadian, whose average investment is about $50,000.

Among the other funds that own shares of RCM Global, according to court papers filed by Lipschutz, are the Contravest Fund, WW Capital Growth Fund Ltd., Winchester Futures Ltd. Olympia Star Series, Kingate Global Fund, Longchamp Fund, Clifcor Fund and Nemrod Leveraged Holding Ltd.

RCM Global and Rowayton have asked a judge in New York State Supreme Court in Manhattan to return RCM Global's assets to the Daiwa account and freeze them there until a ruling on whether Daiwa's seizure of the funds is legal. The defendants say they expect a decision Wednesday.

Friedland at Magnum said "in all probability'' he will bring a lawsuit against Daiwa for the trouble it has caused Magnum's investors. He said he expects other managers to do likewise unless the money is returned soon.

"What Daiwa has done is a criminal action,'' he said. "It's tantamount to theft.'' Funds like Magnum's and Rowayton's are part of the growing universe of investment partnerships, often referred to as hedge funds. In the US, the funds are limited to fewer than 100 investors, most of them wealthy individuals or institutions, to avoid coming under the jurisdiction of securities laws that govern larger investment funds.

So-called "offshore'' funds like RCM Global, which is based in Bermuda, aren't open to U.S. investors. These funds have about $96 billion under management, according to Van Hedge Fund Advisors in Nashville, Tennessee.