This case involves a group of defendants in Ohio who acted as fiduciaries and investment advisors to plaintiffs who assert they were conservative investors who trusted the defendants with most of their assets. The plaintiffs in this case alleged that the defendants breached their fiduciary duties by falsely and deceptively marketing, promoting, and recommending that the plaintiffs invest large sums of money in hedge funds managed and operated by them and others, including their consultant and business partner.
The defendants, as well as their business partner, had financial interests in each other’s funds. One fund that the defendants recommended the plaintiffs invest in purportedly used a “proprietary strategy” involving an active, controlled, and complex investment formula whereby investors’ money was equally “long” and “short” in order to stabilize investment returns and protect against dramatic market fluctuations. The plaintiffs asserted that the fund never employed a proprietary trading strategy, and, in fact, employed no investment strategy and engaged in no trading of securities whatsoever. Rather, plaintiffs alleged it was nothing more than a “feeder fund” that simply funneled investors’ money to a large-scale Ponzi scheme run by a single manager. Further, the fund extracted hefty “management fees” from investors for doing virtually nothing with their money. The plaintiffs assert that they were denied the ability to control their money, and they lost their entire investment — nearly half of their assets — when the scheme was revealed.
