Mutual fund plummet blamed on Aspen homeowner’s firm
February 20, 2018
A federal lawsuit seeking class-action status claims that a mutual fund founded and chaired by a part-time Aspen-area resident is in violation of the Securities Act because of false and misleading statements that cost investors hundreds of millions of dollars.
Anthony Caine, who owns a home outside of Aspen appraised at $19 million by the Pitkin County Assessor's Office, is one of the eight company executives, as well as the firm he founded, LJM Funds Management, targeted in the suit.
"Whether he has friends or acquaintances in Aspen, there's an Aspen connection here, unfortunately, as a significant amount of wealth was lost as a result of the decline and value of that fund," said South Miami lawyer Michael Criden, a plaintiffs attorney who also owns a place in Aspen, on Monday.
Criden's firm, Criden & Love PA, as well as Scott+Scott Attorneys at Law of New York and Freed Kanner London & Millen of Illinois, filed the 10-page federal lawsuit Feb. 9 in Chicago.
The suit was filed on behalf of investors who bought shares of the LJM Preservation and Growth Fund Class I — LJMIX is its ticker symbol on the NASDAQ — between Feb. 28, 2015, and Feb. 7.
The suit contends that the fund's value nosedived by 80 percent from $9.82 on Feb. 2 to $1.94 at the close of trading Feb. 7. The plummet was the product of the 4.6 percent drop suffered by Standard & Poor's 500 Futures Index on Feb. 5, the suit says.
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"It's pretty much cooked," Criden said of LJMIX, which at one time was worth $400 million, he said. The entire LJM Preservation and Growth Fund was at one time valued at $800 million.
The suit does not accuse Caine of fraud; in fact, he invested in LJMIX. Caine, however, allegedly "promoted and solicited the sale of LJMIX stock … to serve (his) own financial interests, including … receipt of millions of dollars from underwriting fees, spreads and other compensation," the suit says.
The fund held its value in calmer markets, but the Wall Street struggles of earlier this month showed its vulnerability that was not disclosed to investors.
"In truth, however, (the fund) was not focused on capital preservation and left investors exposed to an unacceptably high risk of catastrophic losses," said the suit.
Defendant LJM Funds Management ran the mutual fund. A message left at Caine's Aspen-area home was not returned Monday, and a request for comment from the Chicago company was not returned.
Last week, Financial Times reported that Caine wrote a letter to investors saying that "LJM strategies have suffered significant losses. At this time, the portfolio management team is trying to hedge with as many futures as possible to attempt to insulate portfolios from further losses."
The size of the class of plaintiffs could be as many as hundreds or thousands, the suit says.
"There were a lot of small investors in this, not just the multimillionaires," Criden saod. "There were some people who invested $15,000 to $20,000, 401(K) type money."
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