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Fund Manager LJM Partners Sues Over Volatility Losses

LJM Partners is suing a number of unnamed parties after losing hundreds of millions of dollars during a major incident of stock market volatility early last year now known as “Vol-magedon.” The Chicago-based fund manager and commodity trading advisor (CTA) claims that these losses are what forced it to go out of business.

LJM had backed complex derivatives, which plunged in value after the largest ever one-day jump in the VIX volatility index in February 2018. The fund manager later gave back what was left of clients’ funds and shuttered its operations.

While LJM held $812M in assets at the start of that month, by the end of February, that figure had dwindled to $14M. One of its affiliates, which operated the LJM Preservation and Growth Fund—a mutual fund for retail investors—lost half its value due to the VIX volatility index jump. The fund then went on to lose the rest of its value as it unwound its holdings.

Now, LJM wants the owner of the VIX index, Cboe Global Markets Inc., to disclose the identities of those it thinks may be to blame for the index volatility that caused the market to crash. The fund manager’s lawsuit claims that when the S&P 500 dropped 4.1% on 2/5/18, these unnamed parties posted inflated prices for options that were related, causing the index to be boosted to benefit positions in VIX-linked products that the index was holding. This raised the VIX while impacting the price of instruments that were experiencing tandem movements with these options, including some of which LJM traded in. The fund manager said that this forced it to trade in these instruments at artificial rates, eventually causing it to lose money.

LJM had previously filed a claim against Wells Fargo & Co. (WFC) unit for the losses, contending that the brokerage firm had been adamant that the fund manager unwind its portfolio following the index jump. A judge tossed out the claims but the fund manager is hoping to bring the case back. Wells Fargo Securities, meantime, has sought the help of a court to get back $16.4M from LJM that it claims are margin payments owed.

Over the last year, investors have filed losses against LJM, its founder Anthony Caine, and LJM portfolio manager Anish Parvataneni, who ran the the LJM Preservation and Growth Fund. The claimants contend that the risks involved in the fund manager’s investment approach were not adequately disclosed to them. The investors say that they were told the fund could give them “solid returns” while keeping within “risk parameters.”

If you were an investor who sustained losses during Vol-magedon while investing with LJM Partners, in the LJM Preservation and Growth Fund, or with any other fund whose securities were sold to you by a broker and/or brokerage firm, please contact Shepherd Smith Edwards and Kantas, LLP (SSEK Law Firm) today. Our broker fraud lawyers work with investors nationwide in helping them to recoup their money.

Contact SSEK Law Firm today to request your free, no obligation case consultation.

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