From March through May of 1994, several large nonfinancial firms announced millions of dollars in losses from derivatives deals, especially those arranged by Bankers Trust. Accompanying these announcements and related news stories were allegations that Bankers Trust had either misrepresented, lied, or deceived its clients. Using SUR methods, we investigate how these announcements affected Bankers Trust and three portfolios of banks: dealers, nondealers, and nonusers. Our results indicate significant cumulative abnormal returns of −12.14% (Bankers Trust), −5.56% (13 dealer banks), and −2.45% (32 nondealer, user banks). The evidence suggests an intra-industry, information-transfer effect consistent with rational pricing. The replacement cost of derivative contracts is an important factor in explaining the variation in abnormal returns across banks.