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Another fall from grace

There are interesting parallels in the stories of Lance Armstrong and Karen Bruton. Armstrong was the inspirational cycling icon who beat cancer and repeatedly won the Tour de France, the sport's toughest race. Bruton's exploits were financial rather than athletic. She was heralded as "Supertrader," an options trader and hedge fund manager who made millions of dollars and donated profits to a charity dedicated to fighting poverty around the world.

The fall from grace is never pretty. Armstrong's fall broke the hearts of many cancer survivors who believed his cycling feats were the result of gritty determination. Instead, he was exposed as the mastermind of a sophisticated doping scheme. Bruton's admirers believed her wealth was the result of her sophisticated understanding of options trading. Instead, the SEC charges that Bruton ran a scheme in which she and her associates gained "millions of dollars in fees to which they were not entitled."

Hope Advisors, Inc., the Tennessee firm Bruton runs, manages hedge funds that provide the funds to operate the nonprofit Just Hope International, a charity helping impoverished communities.

Hope Advisors funds are valued at $175 million. The hedge fund's executives were not to receive compensation unless the fund covered its losses and paid investors. The SEC said Bruton and her associates "disregarded investors by engaging in a pattern of deceptive trades so they could continue earning large incentive fees."

Hope Advisors allegedly structured end-of-the-month trades that gave the appearance on paper that the hedge fund was making a profit. The trades essentially pushed more than $50 million in unrealized losses into the following month, when the pattern would be repeated. Meanwhile, the Hope Advisors executives received "millions" in compensation to which they were not entitled, the SEC said in a recent complaint about the Brentwood firm.

Hope Advisors says it hopes a full inquiry will "clear our names."

In the world of finance and investments, inspirational figures can sometimes have feet of clay. Far too often, investors blame themselves for not recognizing fraud, when the reality is that the deceptions are often so sophisticated that virtually the entire world is fooled.

If you are a victim of a deceptive broker engaged in securities fraud, you can speak with a Lexington attorney devoted to protecting clients' interests. 

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