It wasn't innovative strategy behind Karen the SuperTrader's consistent returns after all, the U.S. Securities and Exchange Commission says, but a much more tried-and-true technique: fraud.
Karen Bruton, the Nashville-based hedge fund manager behind the Web moniker and her Hope Advisors, which oversees more than $175 million for clients, improperly used options trades to defer losses into future periods, resulting in juicy incentive fees from clients when none should have been paid, the agency said in a complaint in federal court in Atlanta this week.
Hope Advisors has been barred under an order from accessing $7 million in its two hedge funds and restricted from taking any new investments from clients, the SEC said in a statement. Bruton and Hope Advisors both consented to the order without admitting or denying the allegations, according to the SEC.
The two "disregarded investors by engaging in a pattern of deceptive trades so they could continue earning large incentive fees," Walter Jospin, director of the SEC's Atlanta regional office, said in the statement.
Last year, Hope Advisors was fined $100,000 by the Commodity Futures Trading Commission for registration and reporting violations.
The new allegations paint a very un-uber portrait of Bruton, 66, a self-taught options trader who mesmerized fans and flummoxed skeptics with her life story of parlaying a $10,000 initial investment into a fortune and seemingly endless stream of profits. A North Carolina native, she garnered the honor of distinguished alumna in 2014 from Wake Forest University, where she had earned a master's degree in business administration.