LLC Liability

Discussion in 'Prop Firms' started by vulture, Apr 4, 2002.

  1. Not very knowledable here about the legal ramifications of joining an LLC and becoming a "member", but curious as to how the "member" is absolved of any financial liability if(when) an LLC trading firm with extreme leverage blows up. Obviously, this would not be a concern for the "backed" traders at the firms, but what happens when the guys who deposit the funds into the LLC and then assume the firm liability as an individual member?

    I ask this because I remember 3 years ago a big Chicago derivatives house(Griffin Trading, I believe) had a rogue trader in Hong Kong or London who managed to circumvent his trading limits and make a huge year end play which blew up and put the Trading Firm into receivership. The traders within the firm had their accounts frozen I believe.

    Has this happened in the equity prop trader business? If so, what steps have managers taken to insure the liability of the other members in case of a liquidation
  2. Typically your capital would be @ risk, but your liability would end there.