Karen at court

atrp2biz · Aug 31, 2017

I don't think you guys have read the claim. This is not what the claim is about.

Please read the first five paragraphs.

DeltaRisk · Sep 1, 2017

Pekelo said:
Yeap, I think she has a 50-50% chance to get away with it. Greediness is not a criminal offense...
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6 months probation, and 300 hours of community service. White collar crimes are just like speeding tickets.

Pekelo · Sep 1, 2017

After a criminal acquittal could she (or TT) be civil sued? Sure. Would they win it? No.

By the way the 4th link in my OP keeps updating, on Wednesday:

"SECOND AMENDED COMPLAINT against Karen Bruton, Hope Advisors, LLC, Just Hope Foundation, Dawn Roberts, Todd Wortman, filed by Securities and Exchange Commission."

If someone wants to read the document, that website has a $5 flat charge per document.

SteveH · Sep 1, 2017

I think she'll go free on this. Of course, a non-greedy person would have stopped with the original, incredible windfalls she made on her personal account before heavily involving others, realizing it was just a special time in the market while she had a brokerage not enforcing more stringent rules on her (e.g., setup iron condors).

I can't believe anyone would go near the TastyTrade folks after that level of gullibility had been clearly shown. Well, okay, yeah, I can, but...

atrp2biz · Sep 1, 2017

*sigh*

Here is the summary of the claim.

Again, this case is about fees and nothing about fund performance. There's not even enough information to determine if the fund made or lost money as a whole since inception. Why would TT or TDA be liable for how the fund manager takes fees from the fund?

Note that in para 4, the claim uses the word, "almost". There's a lot of information in the use of that word.

1. This enforcement action arises out of a fraudulent scheme to generate fees by Hope Advisors, LLC (“Hope”), a registered investment adviser, its principal, Karen Bruton, (collectively, “Defendants”). Hope managed the account of two private investment funds, Hope Investments, LLC (the “HI Fund”) and HDB Investments, LLC (“HDB”) (collectively, the “Funds”). Hope’s only compensation for managing the funds came in the form of an incentive fee, calculated as a share (10% for the HI Fund and 20% for HDB) of the profits earned in the Funds’ accounts.

2. The HI Fund and HDB employed a “high-water-mark” fee structure pursuant to which Hope was entitled to no fees unless the Funds made profits that exceeded past losses. In other words, all prior losses needed to be made up before Hope would be paid. Since at least November 2014, Hope and Bruton have engaged in a continuous pattern of fraudulent trading to circumvent the impact of the high-water-mark fee structure. The fraudulent trading exploited the HI Fund’s obligation to calculate the incentive fee exclusively on the basis of monthly “realized” gains and losses—“unrealized” gains and losses (i.e., those attributable to open trading positions at a month’s end) were not included in the fee calculation.

3. Each month, Hope caused the Funds to make certain “Scheme Trades” that had the purpose and effect of realizing a large gain in the current month while effectively guaranteeing a large loss would be realized early the following month. In essence, these trades continuously converted any realized losses into realized gains in the current month, and losses which would be realized in subsequent months, except that they would be continually deferred by the Defendants engaging in additional Scheme Trades. The Defendants did not simply delay realization of trading losses, however, they also intentionally sized the Scheme Trades such that the Funds realized a profit every month. Hope employees maintained a spread sheet that tracked, month to date, the realized losses of the Funds. As the end of each month approached, Bruton picked the amount of profit she wished the Funds to show (and de facto, the fees she wished to generate), and her traders would size the Scheme Trades accordingly.

4. Without the fraudulent Scheme Trades, Hope would have received almost no incentive fees from at least October 2014 through the present. Instead, Hope extracted millions of dollars in incentive fees. In recent months, Hope has been using the Scheme Trades to avoid realization of more than $50 million in losses, while still earning large monthly incentive fees.

5. In addition to the incentive fee paid to Hope by the HI Fund, the fund paid a 10% incentive fee to the Just Hope Foundation (the “Hope Foundation”), which in turn funded Just Hope International (the “Hope Charity”), a charity founded and run by Bruton. The Hope Foundation and its employees (aside from Bruton) were not involved in the fraudulent trading scheme, however, it did not provide any goods or services to the HI Fund in exchange for the incentive fees the Hope Foundation was paid. Accordingly, the Hope Foundation was unjustly enriched and is a Relief Defendant in this action.
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i960 · Sep 1, 2017

atrp2biz said:
*sigh*

Here is the summary of the claim.

Again, this case is about fees and nothing about fund performance. There's not even enough information to determine if the fund made or lost money as a whole since inception. Why would TT or TDA be liable for how the fund manager takes fees from the fund?

Note that in para 4, the claim uses the word, "almost". There's a lot of information in the use of that word.
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Pretty sure it is about performance when the fees are tied to it.

Cmon guys we've been over this already. If you're fucking around with realized and non realized losses to keep the fees accumulating you're thieving your clients.

atrp2biz · Sep 1, 2017

Let's put it this way. There is no lawsuit if the fees charged were based on realized and unrealized P/L (not just realized). I don't know why this is so hard to understand.

ajacobson · Sep 1, 2017

Civil litigation won't be about her or fees. They'll go after the deep pockets of TD and Tastytrade. She prevails it lowers the likelihood. She loses the vultures will sweep in. Rest assured the suits will all seek rescission. They key reason she was taken off the show has to be liability

atrp2biz · Sep 1, 2017

For what? How much have investors made or lost? None of us have this information.

This is tiring.

Pekelo · Sep 1, 2017

atrp2biz said:
There's not even enough information to determine if the fund made or lost money as a whole since inception.
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Who cares about inception? If you signed up in the summer of 2014 and the fund sarted to have a loss in October, why would you or anyone care about 2012's performance? The loss is obvious, according to your quote:

"Hope has been using the Scheme Trades to avoid realization of more than $50 million in losses"