High Tech IA Charged with Fraud by Commission
Offering frauds continue to be one of the leading categories of actions brought by the Commission. The variety of these cases is only limited by the imagination of those conducting them. Under that view the scope of these cases is virtually is limitless. The Commission’s most recent case in this area centers in part on the new hot topic de jure, artificial intelligence. SEC v. Tadrus, Civil Action No 1:23-cv-05708 (E.D.N.Y. July 28, 2023).
Named as defendants in this action are: Mina Tadrus and Tadrus Capital LLC, respectively, a registered broker-dealer and the founder of Tadrus Capital. The Fund targeted members of the Egyptian Coptic Christian community.
Beginning in September 2020 Defendants solicited and sold interests in the Tadrus Fund. It was supposed to be a pooled investment vehicle. Over the period at least 31 interests were sold to investors. The amounts varied from $20,000 to $345,000. Overall, about $5 million was raised.
Investment accounts were held in the name of the firm. None were segregated. The sales pitch in part was detailed on the website for at least one version. It identified the firm as a “global quantitative alternative investment manager.” It also claimed that the firm “invest[ed] our clients’ capital in multiple quantitative investment strategies, including a fully systematic quantitative global macro investment program covered all asst classes.” The strategy was implemented “virtually 24/7” and used “stop losses” and short sales.
Investors were told that their money would be pooled and invested in “the world’s first private high-yield and fixed income quantitative hedge fund.” It would use “artificial intelligence-based high-frequency trading models.” Investors were supposed to be paid 1.5% or 2.5% on the first of each month. This gave each investor a return of 18% or 30% per year.
In fact, large portions of the money was used for the benefit of Defendants. The complaint alleges violations of Securities Act Section 17(a), Exchange Act Section 10(b) and Advisers Act Sections 206(1), 206(2) and 206(4). The case is in litigation.
High Tech IA Charged with Fraud by Commission
Offering frauds continue to be one of the leading categories of actions brought by the Commission. The variety of these cases is only limited by the imagination of those conducting them. Under that view the scope of these cases is virtually is limitless. The Commission’s most recent case in this area centers in part on the new hot topic de jure, artificial intelligence. SEC v. Tadrus, Civil Action No 1:23-cv-05708 (E.D.N.Y. July 28, 2023).
Named as defendants in this action are: Mina Tadrus and Tadrus Capital LLC, respectively, a registered broker-dealer and the founder of Tadrus Capital. The Fund targeted members of the Egyptian Coptic Christian community.
Beginning in September 2020 Defendants solicited and sold interests in the Tadrus Fund. It was supposed to be a pooled investment vehicle. Over the period at least 31 interests were sold to investors. The amounts varied from $20,000 to $345,000. Overall, about $5 million was raised.
Investment accounts were held in the name of the firm. None were segregated. The sales pitch in part was detailed on the website for at least one version. It identified the firm as a “global quantitative alternative investment manager.” It also claimed that the firm “invest[ed] our clients’ capital in multiple quantitative investment strategies, including a fully systematic quantitative global macro investment program covered all asst classes.” The strategy was implemented “virtually 24/7” and used “stop losses” and short sales.
Investors were told that their money would be pooled and invested in “the world’s first private high-yield and fixed income quantitative hedge fund.” It would use “artificial intelligence-based high-frequency trading models.” Investors were supposed to be paid 1.5% or 2.5% on the first of each month. This gave each investor a return of 18% or 30% per year.
In fact, large portions of the money was used for the benefit of Defendants. The complaint alleges violations of Securities Act Section 17(a), Exchange Act Section 10(b) and Advisers Act Sections 206(1), 206(2) and 206(4). The case is in litigation.