A bankruptcy court judge sunk investors' hopes in their latest lawsuit against Lehman Brothers, which they claim broke contracts in junk mortgage-backed securities sold during the bubble years.

Judge Shelley Chapman of the U.S. Bankruptcy Court for the Southern District of New York on Wednesday denied the investors' motion to more than double the $5 billion that Lehman's bankruptcy estate set aside for their claims. The investors, represented by four bank trustees, had argued in August that the liability reserve should actually amount to $12.14 billion.

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