Canarsie hedge fund exec faces 5 years prison for fraud: U.S. judge
By Jonathan Stempel
NEW YORK (Reuters) - A New York hedge fund founder who before turning age 30 lost nearly all of the roughly $57 million he oversaw in less than three weeks is expected to be sentenced to five years in prison after pleading guilty to fraud, a federal judge wrote.
Owen Li, the founder of Canarsie Capital LLC, is also expected to be required to pay $56.8 million of restitution to his investors, and serve three years of supervised release, U.S. District Judge Robert Sweet in Manhattan wrote on Thursday.
The judge is expected to formally sentence Li at an April 21 hearing, and can change his mind.
Scott Resnik, a lawyer for Li, did not immediately respond to requests for comment. A spokeswoman for U.S. Attorney Preet Bharara in Manhattan declined immediate comment.
The punishment would cap the abrupt downfall of Li, a former trading assistant at a unit of Raj Rajaratnam's Galleon Group who formed Canarsie, named for a Brooklyn neighborhood, in 2012.
Li pleaded guilty in December, when he was 29, to counts of securities fraud and making a false statement.
Prosecutors said his fund suffered catastrophic losses in January 2015 after he had moved nearly its entire portfolio into long, unhedged market index options whose value collapsed as prices moved in the opposite direction.
According to prosecutors, the collapse occurred after Li had lied to his investors by overstating Canarsie's performance, and misled the U.S. Securities and Exchange Commission about trades he had fraudulently reported to conceal his use of leverage and the size of an investment in Facebook Inc (FB.O: Quote). Continued...