The receiver for imploded hedge fund manager Traynor Ridge Capital Inc. has named National Bank of Canada and JonesTrading Canada Inc. as “potential creditors” of the company.
Ernst & Young LLP says the two companies, not previously linked to Traynor Ridge Capital (TRC), are joined by Echelon Wealth Partners and Virtu Canada Corp. as creditors. EY says it cannot currently estimate the amounts the four are owed.
The Ontario Securities Commission (OSC) put a cease-trade order on Traynor Ridge in late October after the sudden death of its founder, owner and chief executive Christopher Callahan. The OSC said three investment dealers executed trades for Traynor Ridge, then could not collect payment for the securities. The OSC estimated at the time that the dealers have potential losses totalling approximately $85-million to $95-million.
The OSC then received court approval to appoint EY as a receiver to take control of the firm and its funds.
EY noted Mr. Callahan was TRC’s sole director, officer and shareholder. “As the debtors have no other management, the receiver is still working to obtain all of the relevant books and records” and to identify all the creditors.
Virtu and Echelon emerged publicly as two of the three introducing brokers that executed Traynor Ridge’s trades. Virtu Canada Corp. sued Traynor Ridge, estimating it has losses of at least $5-million. And Echelon Wealth Partners Inc. placed a $30-million lien on the assets of Traynor Ridge, its funds and Mr. Callahan. Echelon CEO David Cusson told The Globe and Mail the lien covers the original value of the trades, not the losses incurred.
JonesTrading Institutional Services LLC, the Canadian company’s California-based parent, describes itself as a “highly differentiated independent broker dealer and investment bank providing a wide range of services” including multiple types of trading. A media representative for JonesTrading has not responded to multiple queries from The Globe starting in late October.
National Bank’s role with Traynor Ridge is unclear. Matthieu Charest, a spokesperson for National Bank of Canada, declined to comment other than to say “any potential financial impact would be immaterial to the bank.”
The OSC, in its request for a court-appointed receiver, said CIBC World Markets and BMO Nesbitt Burns Inc. served as prime brokers for Traynor Ridge’s funds. In its lawsuit, Virtu said Traynor Ridge used prime brokerage accounts at CIBC and TD Securities Inc.
EY says it is in the process of taking possession of the property of Traynor Ridge and its funds and it has already frozen their bank and brokerage accounts.
Earlier this week, the OSC said it was extending the cease-trade order it imposed Oct. 30 to Feb. 8 of next year. In the staff’s application for the order, it noted OSC enforcement staff are investigating Traynor Ridge’s trading activities because a preliminary review “shows some trading without any change in beneficial or economic ownership.”
Mr. Callahan founded Traynor Ridge in 2020. He previously worked as an associate portfolio manager at HGC Investment Management Inc. and as an analyst at Echelon, the broker that filed the lien against Traynor Ridge. He graduated from Queen’s University in 2014.