Bankrupt hedge fund Weiss Multi-Strategy Advisers LLC and its largest creditor, Jefferies Financial Group, are discussing a potential settlement that would resolve litigation related to the collapse of George Weiss' eponymous firm.

A Weiss lawyer said in a Wednesday bankruptcy court filing that the firm has engaged in settlement talks that could resolve a lawsuit accusing Jefferies and its affiliate Leucadia Asset Management of using the threat of litigation against its employees to unfairly extract $20 million from the hedge fund before it filed bankruptcy.