According to filings the minimum investment accepted from an outside investor in the fund was $1 million. At its peak, Canarsie Capital had managed around $98 million in assets and had some well-known contributors. Goldman Sachs was the fund’s prime broker and clears and settles trades for the hedge fund starting in the fall of 2014. The Goldman Sachs switch came after the fund was dropped in March 2014, by Morgan Stanley’s prime brokerage over concerns with the fund’s risk practices.
On January 20, 2015, Li, wrote an apology letter to investors telling them that he “engaged in a series of aggressive transactions” during the first three weeks of 2015 that resulted in losing all but $200,000 of the fund’s capital, a 99.7% loss. According to the letter, Li engaged in aggressive trading in an attempt to recuperate prior losses the fund suffered in the fund in December 2014. At this time it’s unclear what the trading strategy was that Li engaged in January of this year. The only details in the letter concerning the securities themselves are that they included “options with strike prices pegged to the broader market increasing in value” and “some direct positions.”
The letter also suggests that Li may have been misleading others concerning the profits and losses of the fund on daily internal trading reports. For example, Goldman Sach’s records showed that the fund had $58 million at the end of December 2014 while other reports only $56 million. According to deRegt the daily internal reports he received from Li showed only modest losses and substantially reduced risk and did not reflect the trading activity in Goldman Sach’s records.
Investors who have suffered investment losses due to broker misconduct may be able recover their losses through securities arbitration. The attorneys at Gana Weinstein LLP are experienced in representing investors concerning securities violations. Our consultations are free of charge and the firm is only compensated if you recover.