Legal Matters

LJM Partners, out of Chicago, Illinois, saw massive losses to its LJM Preservation and Growth Fund (“LJMIX”) in February, losing over 82 percent of the Fund’s value in a single week. The Fund held risky positions based on the CBOE Volatility Index, or VIX, which rose to near seven-year highs. The fund was overexposed to this volatility risk, suffering catastrophic losses while the market downturn was only around 5%. LJM, however, had marketed the Fund as “seeking capital appreciation and capital preservation with low correlation to the broader U.S. equity market” and pitched its ability to “preserve capital, particularly in down markets (including major market downturns).” Companies like LJM are required to make adequate and accurate disclosures in their marketing materials to allow investors to make informed decisions about their investments. Likewise, brokers recommending the LJM Fund to their clients were obligated to understand the Fund’s features and risks, to disclose those risks to their clients, and to make certain [...]

The Securities and Exchange Commission has filed a Complaint seeking monetary and injunctive relief against 1 Global Capital, LLC and its Chairman and CEO, Carl Ruderman, along with the Ruderman Family Trust and a host of related companies used to carry out the alleged scheme. According to the Complaint, the Defendants used a network of barred brokers, registered and unregistered investment advisors – to whom they paid millions in commissions – to fraudulently raise more than $287 million from more than 3,400 investors nationwide to fund 1 Global’s business of offering short-term financing to small and medium-sized businesses. The company allegedly would tout its rigorous underwriting process through which it claimed to approve only one in ten merchants who applied for a loan. In reality, however, the SEC alleges that the defendants used substantial investor funds for purposes other than the cash advances, including paying operating expenses and purchasing already-distressed, long-term credit card debt. The SEC further alleges that 1 [...]

LJM Partners LJM Partners, out of Chicago, Illinois, saw massive losses to its LJM Preservation and Growth Fund in February, losing over 82 percent of the Fund’s value in a single week. The Fund held risky positions based on the CBOE Volatility Index, or VIX, which rose to near seven-year highs. The fund was overexposed to volatility risk, suffering catastrophic losses while the market downturn was approximately 5%. LJM marketed the Fund, however, as “seeking capital appreciation and capital preservation with low correlation to the broader U.S. equity market” and pitched its ability to “preserve capital, particularly in down markets (including major market downturns).” LJM investors have already filed class-action lawsuits against LJM to attempt to recover their overwhelming losses. Companies like LJM are required to make adequate and accurate disclosures in their marketing materials to allow investors to make informed decisions about their investments. Likewise, brokers recommending the LJM Fund to their clients were obligated to understand [...]