A FINRA arbitration panel in November made a decision in the case of Interactive Brokers LLC vs. Lek Securities, Petra Trading Group LLC, Last Atlantis Capital Management (LACM), Mark Steven Ramos, Martin Allamian, and Michael Elizondo dismissing with prejudice claims by IB of fraud and counterclaims from LACM.
IB claimed that LACM engaged in fraud and illegal trading and withheld funds from LACM’s clearing broker stemming from payment-for-order-flow (PFOF) and asked for more than $14 million related to past payments. The claims led to a National Futures Association (NFA) claim against LACM, charging them with providing false and deceptive reports to participants. LACM and principal Irwin Berger denied the allegation in the case, which was eventually settled after LACM and Berger withdrew
Following the decision LACM announced that it would relaunch its “Share Class O” strategy that was at the center of the controversy. “The claims were dismissed, [the strategy] is not illegal wash trading and it is not illegal matched orders,” Berger says.
While the decision dismissed IB’s claims against LACM, it did not require them to release PFOF funds held from LACM’s clearing broker.Michael Elizondo, a spokesperson for LACM, says, “We are currently investigating if there are other actions we can take.”
Structural changes ahead
Scott C. Malpass, vice president and chief investment officer at the University of Notre Dame, spoke at the CME Group’s Global Financial Leadership Conference in November held in Naples, Fla., on the global outlook for endowments. Malpass, who is responsible for investment of the university’s $6.2 billion endowment, said that although 2008 was a difficult year, Notre Dame’s investments outperformed the broader market. “Diversification protected [us] against worst outcomes,” Malpass said.
He noted that the hedge fund industry will face many changes in coming years, including a greater demand for transparency and liquidity.