If what she did was spelled out in DDQ, she did nothing wrong. If her clients' put their signature on it, they agreed to her terms.
If memory serves, fees were determined by unrealized gains over and above a high water mark. If so, she did nothing wrong to the letter of the agreement. I'm sure her defense will argue that her investors were sophisticated parties (re: contract law) and that they should have known that this was a possible outcome (that is realizing gains while deferring losses).
Investors will argue that the success of her strategy was repeatedly showcased on Tastytrade and claim it was investment advice. When they replicated her strategies in their own accounts - if they didn't have her kind of returns they'll find someone to represent them. Investors with option losses find it easy to find an attorney who will represent them on contingency against a deep pocket. It doesn't have to fair - it doesn't have to be reasonable. Pretty easy to find an attorney who will do it against any recovery.
That is not going to happen, just like you can't sue (successfully) Cramer for his opinion on Mad Money. Oh and by the way her defense lawyer just has to bring up the Yahoo boys who profitably copied her strategy. Also her pockets aren't that big. Definiately not 50 mill big. If the judge orders her to forfeit her gains, than she doesn't even have that extra 6 million. If a lawyer signs up for such a case, they should ask for cash upfront instead of %...
That would mean every single financial news outlet with a guest outlining a view on a stock or strategy would be liable for the same. That's why they all have disclosures. Summarily dismissed with costs.
I am not a lawyer so this is just speculation: She should be fined for misleading investors to think she was a money machine but not be convicted of fraud because based on what I read, 1. Her prospectus did spell out how she was going to get paid and how her fund treated investor withdrawal. 2. Since she operated a hedge fund, investors in her hedge funds were presumed to be knowledgeable. Don't you have to satisfy certain conditions before you can invest in one? 3. It is not a crime to be incompetent. 4. There is a fine line between Herbalife and a pyramid, one is legal the other is not. There is a difference between what she did and what Madoff did. She invested all the money she received, too bad it didn't work. I hope they go easy on her.
I expect she'll be named in any action, but the deep pockets will be TD and Tastytrade. If she prevails - I expect it all goes away. If she loses they are going to subpoena her broker's records and investors will claim here repeated visits on Tastytrade were an endorsement while her broker knew her genuine performance. Don't think for a minute that folks on TV don't get named in customer actions. As long as you are going to file an action it costs very little to add a name and serve them. Wins are rare, but this is systemic and the sponsored videos are still sitting on youtube. Early in my career I was named in a lawsuit because a broker in the class did some unsuitable trades and they named everybody related. https://www.sec.gov/litigation/complaints/2009/comp21331.pdf Read paragraph three of the complaint. The civil litigation related to this complaint was well into eight figures. It doesn't take much to find an attorney willing to sue a deep pocket on a contingency basis. I'd bet the repeated appearances will make investors claim they want full rescission. Keep your winners and sue for the losers.