Karen the “Supertrader” (Part 2)
Posted by Mark on July 25, 2016 at 06:50 | Last modified: June 2, 2016 12:50Last time, I explained the delivery of Karen “the Supertrader” Bruton to the trading masses. On May 31, 2016, the SEC made a press release about the 34-page complaint.
Here are some excerpts:
> Each month, Hope [Advisers, which is owned by Bruton]
> 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…
> intentionally sized the Scheme Trades such that the
> Funds realized a profit every month… 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…
> Of the 10% incentive fee paid to Hope by the HI [Hope
> International] Fund, Bruton divided the fee nearly
> equally among herself and two other Hope employees,
> after paying salaries of other employees and expenses
> for Hope…
> If those unrealized losses had been factored in, as
> required by the operating agreement, Hope would have
> been entitled to no fees. Instead, Hope collected
> over $1 million worth of fees during that period…
> Bruton paid herself a significant portion of the fee
> income…
> For example, in October of 2014, Hope experienced
> massive trading losses as a result of volatility in
> the market… [Her funds] collectively ended the month
> with unrealized losses of approximately $100 million,
> most of which resulted from the October trading losses.
> Nevertheless, Hope reported to investors that the
> Funds had millions of dollars’ worth of “realized”
> gains in October and collected incentive fees of more
> than $600,000… Despite the massive trading losses
> in both Funds that month, Bruton caused Hope to pay
> her over $220,000 in early November 2014 for her
> October “performance…” The Defendants never told
> the Funds’ investors about the Scheme Trades… The
> Defendants never told the Funds’ investors that
> Hope was causing the Funds to make trades for the
> primary purpose of avoiding realization of losses.
I will continue in the next post.