Echelon Wealth Partners Inc. has placed a $30-million lien on the assets of hedge fund manager Traynor Ridge Capital Inc., its deceased owner Christopher Callahan and a number of his companies and funds.
Late Monday the Ontario Securities Commission placed Traynor Ridge, which has $95-million in assets under management, under a cease trade order. The commission disclosed that Mr. Callahan had died and that Traynor appeared to be in “serious financial difficulty,” according to the order.
The OSC said that during the week of Oct. 23, three unnamed “introducing” firms executed trades for Traynor Ridge, but when they turned to their own unidentified “carrying” brokers to collect payment, the carrying broker could not recoup the costs of the trades. As a result, the three dealers have potential losses amounting to approximately $85-million to $95-million, the OSC said.
The lien, Echelon CEO David Cusson said in an e-mailed statement to The Globe and Mail, “was registered to cover the original value of the trades, not the losses incurred. The total value of the losses is currently unknown because it is unclear how much is recoverable from Traynor, but the estimated losses are significantly lower than the lien.”
Mr. Cusson said Echelon “can reassure its clients that none of their assets have been impacted by the recent developments at Traynor Ridge … While Traynor Ridge was a trading client of ours, Echelon has flattened all outstanding trading obligations with Traynor and no further exposure to market fluctuations exists.”
Mr. Callahan previously worked for Echelon as an analyst as one of two jobs he held before founding Traynor Ridge.
In the bare-bones lien form, filed Monday after Mr. Callahan’s sudden death, Echelon says it wishes to use the inventory, equipment, accounts and other assets of Mr. Callahan and the affiliated companies as collateral for the lien.
In addition to Traynor Ridge, the Echelon lien lists multiple Traynor Ridge investment funds and partnerships and two of his personal companies.
Virtu Canada Corp. emerged as another of the introducing firms this week after it sued Traynor Ridge, alleging the company failed to deliver money for trades it asked Virtu to execute, resulting in losses of at least $5-million. Virtu, a trading firm that executes orders on behalf of investment management clients, alleges that it placed 26 buy orders for Traynor Ridge in September and October, but never received the required money before the trades settled a few days later.
The Virtu lawsuit, filed Oct. 27, said that the majority of its failed trades for Traynor Ridge occurred between Oct. 11 and Oct. 20.
On Oct. 20, Virtu reached out to Traynor’s prime brokerage, CIBC World Markets Inc., to see whether CIBC had any instructions to settle the payment of the trade. Virtu was told CIBC had no instructions from Traynor.
Virtu then attempted to reach Traynor through telephone calls, e-mails, Bloomberg chats and in person by going to Traynor’s offices, but could not get through. In response, Virtu began to close out the failed trades on Oct. 24 to mitigate losses, and notified Traynor it would be held liable for all losses as a result of the failed trades.
With a report from Stephanie Chambers
David Milstead