Traders "blow up" all the time. It's fraud when a trader using investors' money fails to make proper disclosures on the losses. https://www.sec.gov/litigation/complaints/2016/comp-pr2016-98.pdf
I guess the question is how much $ is left in the fund. It seems to have been losing $ ever since 2014
She has spent the least 2 years living her life as a superhero. I wonder how she feels now, knowing that everyone knows about her and what she has been doing ? Do you think the Tastytrade people are upset with her, knowing that they had put her on a pedestal making her out to be more than she was ?
Yes, and the NFA conducted an audit in 2013, so obviously she was made aware of the convoluted trades. Also, having had 25 years of experience as a practicing CPA, her actions are more egregious. You can take big risks running a hedge fund, AND it's even acceptable to lose money. That's why her investors had to be "sophisticated" (as defined by SEC), and the minimum investment was $250,000 according to the SEC complaint. Whatever was left in the fund, she could not keep booking fake gains and collecting fees indefinitely as the fund was losing money. It would end up with some investors getting nothing if early investors pull out, just like any classic ponzi scheme. Investors probably caught on, and hence the SEC allegations of securities fraud. This is nothing new, there are a host of SEC filings on SEC.gov alleging many types of accounting scams with many advisors. The SEC really doesn't give a damn if investors lose money, the regulators are all about DISCLOSURE. She got caught because she didn't properly disclose to her investors on exactly how she was doing the fancy accounting.
Not sure about how she feels, but it's an interesting case since she gave away 50% of her fees to a charity. The charity is named in the SEC complaint as a "relief defendant" but was obviously not charged since they played no role in the trading scheme. Regarding Tasty Trade, I'll bet the lawyers at TD Ameritrade are looking into it from a legal standpoint to avoid any liability of foreknowledge.
Upon further review, it seems her charity was actually structured as a tax exempt foundation in which she was president, lol! That foundation simply made grants to a charity...HER charity which she founded. Guess where the $10 million of assets of the foundation were being invested? In HER hedge fund, lol lol! So the 50% of fees she was collecting were simply being recycled from the fund, to the foundation, back to the fund. You can't make this s#*t up!
That only makes sense if she counted on making money. There is no point putting back ponzi profits into a ponzi scheme, specially when you know that "last comers take all the loss" even according to the fund disclosures...
The SEC doesn't care whether it made sense or not, or whether she "counted on making money." They don't give a rat's ass if you win or lose, it's all about disclosure as I mentioned. Think about it, you make incentive fees, then place them in a TAX EXEMPT charity, which then invests back into a fund, which then pays out fees, and so on. If she intentionally counted on the "scheme trades" then that act itself was creating her own ponzi. Sorry, I don't see any credible defense out of this. My personal belief is if you follow the case, the ruling will eventually state she will be asked to disgorge the fees, even those that went to the charity (as per the complaint).
My point was, that even though the last man holds the losses stipulation is very ponzi-esque, channeling back profits proves that the original plan was to make money the old fashioned way... The #1 rule of Ponzi running is never reinvest the profits, that is just dumb. (The #2 rule is get out of town before it collapses.) I am explaining what I observe, I don't care what the SEC does or what the outcome will be...