How Many Yachts Can John Devaney Water-Ski Behind?

How desperate the situation might be for United is best evidenced by Devaney's latest moves.

Devaney also hired international law firm Morgan Lewis & Bockius in anticipation of potential lawsuits resulting from a possible collapse of the troubled hedge funds, according to a source who is familiar with United Capital's management.

A spokeswoman for Morgan in Miami said that the firm does not disclose its clients.

Subprime problems have been sweeping Wall Street this year. The plunge in the value of securities tied to loans made to homeowners with poor credit histories took down a pair of hedge funds affiliated with Bear Stearns(BSC Quote) this month.

But Devaney saw an opportunity to bet millions of dollars, including his own net worth, on a spike in the ABX. Apparently he believed either that the worst might be over in the subprime market or that he could bang out a return on positive sentiment.

"Some investors are extremely scared by the recent price action and volatility of this new index product," he said back in May, adding, "I should do well in this environment."