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Alternative Market Briefing

SEC files civil action against CTA LJM

Monday, May 31, 2021

B. G., Opalesque Geneva:

Following the collapse of the LJM Preservation and Growth Fund in February 2018 after a sharp VIX spike, the U.S. Securities and Exchange Commission on Thursday filed a civil action against investment advisers LJM Funds Management Ltd, LJM Partners Ltd, founder Anthony Caine and portfolio manager Anish Parvataneni. Mr. Caine has since retaliated and said VIX manipulation was the primary cause of the losses.

The SEC alleges that the defendants had fraudulently misled investors and the board of directors of a fund they advised about LJM's risk management practices and the level of risk in LJM's portfolios.

According to the SEC, LJM adopted a short volatility trading strategy that carried risks that were remote but extreme. The complaint alleges that, in order to ease investor concerns about the potential for losses, LJM, Caine and Parvataneni made a series of misstatements to investors and the mutual fund's board about LJM's risk management practices, including false statements about its use of historical event stress testing and its commitment to maintaining a consistent risk profile instead of prioritizing returns. Furthermore, beginning in late 2017, during a period of historically low volatility, LJM, Caine, a......................

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