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United States. Securities and Exchange Commission

Owen Li Pleads Guilty to Securities Fraud and Making a False Statement

Strategic Insights

— 2 min read

Owen Li, the founder and portfolio manager of Canarsie Capital, LLC, a hedge fund that collapsed in January 2015, pleaded guilty to securities fraud and making a false statement. Li's actions deceived investors and the U.S. Securities and Exchange Commission (SEC) about the performance of Canarsie, leading to significant losses for the fund and its investors. The investigation and prosecution of Li were carried out by the FBI and the SEC, in cooperation with the U.S. Attorney's Office for the Southern District of New York. Li's guilty plea marks a significant victory for the government's efforts to combat financial crimes and protect investors.

Key Takeaways:

  • Owen Li, the founder and portfolio manager of Canarsie Capital, LLC, pleaded guilty to securities fraud and making a false statement.
  • Li's actions deceived investors and the SEC about the performance of Canarsie, leading to significant losses for the fund and its investors.
  • Canarsie was a hedge fund that collapsed in January 2015, with assets under management of approximately $56.8 million.
  • Li misreported trades to the prime broker, which resulted in the fund avoiding a margin call and being able to employ excessive leverage.
  • Li also lied to investors about the fund's performance, including falsely stating that the fund's performance was down only 9% in April 2014 when it was actually down 23%.
  • The SEC charged Li and Canarsie with civil charges, and the case is being handled by the Office's Securities and Commodities Fraud Task Force.
  • The investigation and prosecution of Li were carried out by the FBI and the SEC, in cooperation with the U.S. Attorney's Office for the Southern District of New York.
  • Li's guilty plea marks a significant victory for the government's efforts to combat financial crimes and protect investors.

Preet Bharara, the U.S. Attorney for the Southern District of New York, said: "As Owen Li has now admitted, he lied to his investors and lied to the SEC. His conduct led to crippling losses for his fund and its investors."

Diego Rodriguez, the Assistant Director-in-Charge of the New York Field Office of the FBI, said: "Owen Li's multiple unlawful actions as a trader finally caught up with him today as he pleaded guilty to securities fraud and making false statements."

According to the Information filed in Manhattan federal court: Canarsie was founded in January 2013 with approximately 10 investors and $16.55 million in assets under management. By the end of 2013, Canarsie had approximately $47.75 million in assets under management, and Li earned over $2.2 million that year.

Statistics:

  • Canarsie was a hedge fund that collapsed in January 2015, with assets under management of approximately $56.8 million.
  • Li misreported trades to the prime broker, which resulted in the fund avoiding a margin call and being able to employ excessive leverage.
  • The fund's net account value on or about December 31, 2014, was approximately $59.7 million.
  • Beginning in early January 2015, Li began liquidating the equity long positions in the account, resulting in approximately $18 million in losses.
  • At the end of the day on January 16, 2015, the account was left with no equity, short, or options positions.

Sources:

  • FBI Press Release: "Owen Li Pleads Guilty to Securities Fraud and Making a False Statement"
  • SEC Press Release: "SEC Charges Former Hedge Fund Manager Owen Li with Securities Fraud"
  • Information filed in Manhattan federal court [1]

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