Recovery of Investment Losses in Blue Crest Capital International
By Attorney Jared Levy
The Securities and Exchange Commission (SEC) has proclaimed that UK-based investment adviser BlueCrest Capital Management Limited will pay $170 million to settle charges for misrepresentations and omissions relating to moving its top traders from its premier client fund of BCI to a proprietary fund, BSMA Limited. The SEC also found that BlueCrest failed to properly disclose that it had replaced those traders with an under-performing algorithm. The SEC will provide the $170 million to harmed investors.
As stated in the SEC’s order, BSMA was designed to trade BlueCrest personnel’s funds using similar trading strategies that BCI used. According to the order, BlueCrest’s governing body’s members had a 93 percent ownership interest in BSMA, which peaked at nearly $1.8 billion.
The SEC found that BlueCrest made inadequate disclosures relating to BSMA’s existence, the transfer of traders from BCI to BSMA, the algorithm used by BCI, and various conflicts of interest. The SEC further found that BlueCrest transferred most of its best traders from BCI to BSMA, and assigned many of its best newly hired traders to BSMA instead of BCI.
According to the SEC’s order, BlueCrest failed to disclose that BCI was using a replication algorithm that tracked certain trades of BlueCrest’s live traders. The order found that the algorithm generated substantially less profits with higher volatility than the live traders. The order also found that BlueCrest was able to keep more of the performance fees that the algorithm generated than those generated by the live traders.
Stephanie Avakian, director of the SEC’s Division of Enforcement, said in a statement: “BlueCrest repeatedly failed to act in the best interests of its investors, including by not disclosing that it was transferring its highest-performing traders to a fund that benefitted its own personnel to the detriment of its fund investors. This settlement holds BlueCrest responsible for its conduct and furthers the SEC’s goal of returning funds to harmed investors.”
Adam Aderton, co-chief of the SEC’s Asset Management Unit, stated: “An adviser’s disclosures to investors and prospective investors in funds they manage must be accurate. BlueCrest investors were marketed a fund with exceptional trading talent but instead got a fund with an undisclosed algorithm that performed worse than those touted traders.”
The SEC’s order finds that BlueCrest intentionally violated antifraud provisions of the Securities Act of 1933 and Investment Advisers Act of 1940. BlueCrest must pay disgorgement and prejudgment interest of $132,714,506 and a penalty of $37,285,494, all of which will be returned to investors.
If you suffered losses in BCI or with BlueCrest, you may be entitled to additional compensation above and beyond any funds that the SEC returns to investors. The securities attorneys at Morgan & Morgan’s Business Trial Group are here to help. Please contact us at 888.744.0142 for a free consultation.
The Business Trial Group at Morgan & Morgan helps investors recover their losses on a contingency basis. We are only paid if we successfully recover money for you. We have helped investors recover tens of millions of dollars of investment losses.
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