SEC’s lawsuit against Tadrus Capital gets stayed
The New York Eastern District Court has stayed the lawsuit brought by the Securities and Exchange Commission (SEC) against Mina Tadrus and Tadrus Capital LLC.
The relevant order was signed by Judge Frederic Block on November 2, 2023, following a request by the US Government.
The government moved to intervene in the civil case and to stay the civil proceedings because of the pendency of the parallel criminal case and a related, ongoing grand jury investigation.
The same underlying facts are at issue in both the civil and the criminal matters.
A stay of proceedings is appropriate because the government’s motion is timely and the same alleged fraudulent schemes are at issue in both the Civil and Criminal Cases. Moreover, a stay of proceedings is necessary, as defendants Mina Tadrus and Tadrus Capital LLC should not be permitted to use civil discovery in the Civil Case to avoid the restrictions on criminal discovery that would otherwise pertain to them in the Criminal Case.
A stay is also necessary to preserve the secrecy of the ongoing grand jury proceedings, and could promote judicial economy.
The SEC’s complaint, filed with the New York Eastern District Court, alleges that Tadrus and Tadrus Capital—respectively, the founder and chief executive officer of an eponymous investment advisory firm and the firm itself—engaged in a multimillion-dollar Ponzi scheme.
Since at least September 2020, Tadrus has solicited and sold investments in Tadrus Capital Fund LP – a purported pooled investment vehicle. Defendants raised over $5 million from at least 31 investors.
Tadrus falsely told investors that their funds would be pooled and invested in “the world’s first private high-yielding and fixed-income quantitative hedge fund” using “artificial intelligence-based high-frequency trading models” that would yield “investors 1.5% or 2.5%, paid on the first of each month, for an annual return on investment [return on investment] of 18% or 30% a year.”
In reality, the defendants did not invest the vast majority of investors’ funds, if any.
Instead, they used a significant portion of the investor funds for Tadrus’ own personal benefit – diverting funds directly to Tadrus and to pay his personal credit card bills, and, made Ponzi payments – which they told investors were “guaranteed” monthly return on investment payments.
In total, during the relevant period, Defendants used approximately $1,431,900 of investors’ money to pay investors the “guaranteed” monthly return on investment payments, including over $275,000 in June 2023 alone, and further misappropriated at least $383,267.93 of investors’ money for Tadrus’ own benefit.