Investments | Law 360 | Joyce Hanson | February 7, 2020
“Law360 (February 6, 2020, 8:59 PM EST) — A Native American tribe has sued an asset management firm in California federal court, saying it shirked its duty to buy securities that matched the tribe’s investment profile and ended up losing about $1.32 million within days.
The federally recognized Picayune Rancheria of the Chukchansi Indians filed its complaint Tuesday against Toronto-based Goldenwise Capital Management Inc. and its principal and chief investment officer, Huakun Ding, alleging that Ding claimed to be an expert in sophisticated securities but failed to ascertain the tribe’s financial goals and subjected the tribe’s account to excessive risk.
In June 2016, the tribe retained Goldenwise and Ding as its commodity trading adviser, according to the lawsuit. In that role, they were obligated ‘to know their customer’ in compliance with industry standards and make both recommendations and securities purchases consistent with the tribe’s investment profile, the suit said.
‘However, instead of buying securities consistent with plaintiff’s investment profile, defendants purchased securities that were unsuitable and, as a result, during February 2018, plaintiff’s account with defendants lost approximately $1,316,877.15 over the course of several days,’ according to the complaint.
Since then, the suit said, the tribe has learned that Goldenwise — which bills itself on its website as ‘a global asset management firm that specializes in trading volatility as an asset class’ for qualified institutions, family offices and high-net-worth investors — withdrew its membership in the National Futures Association as of Nov. 2, 2018.
When Goldenwise invested Picayune Rancheria’s funds in complex securities for which it had no experience or understanding, that ‘risky and speculative investment strategy’ was ultimately detrimental to the tribe, according to the suit.
‘If plaintiff’s account was invested suitably by defendants, it would not have incurred the losses it did in February 2018,’ the suit said.
The complaint asserts one count of professional negligence and one count of breach of fiduciary duty. The tribe seeks an award of damages for the full amount of its monetary loss. […]”
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