Traynor Ridge Capital is said to owe millions of dollars to three firms
A Canadian hedge fund is under investigation after three broker firms lost millions of dollars from a series of failed trades.
A temporary order has been issued against Traynor Ridge Capital Inc. by the Ontario Securities Commission which is “investigating the financial condition of the firm and the events surrounding a series of failed trades.”
The fund’s sole director, officer and shareholder, Christopher P. Callahan, died suddenly on October 28. His passing leaves the firm without a UDP and CCO, and without a director or officer in charge of the firm. The OSC says the firm has one other registered individual, an Advising Representative and Dealing Representative.
Last week, three introducing firms executed trades for Traynor but their carrying broker was unable to recapture the costs of the trades, leaving the dealers with total losses of between $85 million and $95 million.
CIBC World Markets has terminated its prime brokerage service agreement with Traynor as the firm had been unresponsive, the OSC’s order states.
Bloomberg reports that Toronto-based Westcourt Capital Corp. appears to be another of the firms affected. The firm’s chair and co-CEO David Kaufman said that its clients represent the majority of the assets in Traynor Ridge funds, but he did not comment on Traynor’s trading strategies, or the investment recommendations Westcourt makes to its clients.
Market-maker Virtu Financial Inc. disclosed losses of $5 million in a court application filed Monday.
“Traynor Ridge was a client of Virtu. We are working with our client and regulators to help resolve the misconduct that took place at Traynor,” Andrew Smith, a spokesperson for the New York-based trading firm, told Bloomberg. “Our exposure was not material. We are keeping the principals at Traynor Ridge in our thoughts and prayers at this difficult time for them.”
A spokesperson for the Toronto Police Service told Bloomberg that Callahan’s death isn’t considered suspicious in nature and police are not investigating.
Trading restrictions
The temporary order issued by the OSC imposes terms and conditions on Traynor Ridge Capital's registration as an exempt market dealer, portfolio manager and investment fund manager. The order also prohibits all trading in any securities by or of the firm and in the securities of the TR1 Funds.
Traynor manages three prospectus-exempt funds, TR1 Fund, TR1-I Fund and TR1 Fund LP. The general partner is TR1 GP Ltd.
Clients of Traynor Ridge Capital or holders of securities of the TR1 Funds should consult with their registered investment advisor about the status of their investments or contact the OSC’s Inquiries and Contact Centre at 1-877-785-1555 or [email protected].
