IMG Memorial Fund 1 was filed in the Southern District of New York on April 14, 2021, alleging that various defendants, including individuals and investment funds, violated federal securities laws and the common law through their use of a proprietary trading platform. Specifically, the complaint alleges violations of Sections 10(b) and 20(a) of the Securities Act, along with common law claims for breach of fiduciary duty and negligent misrepresentation.
Plaintiff IMG Memorial Fund 1 is a family investment fund. Defendant Jeffrey Spotts is the principal individual who created various investment funds, including the Prophecy Special Opportunities Fund and Prophecy Special Ops GP LLC (collectively, “Prophecy”). Defendant Vantage Consulting Group is an investment advisor with an ownership interest in defendant investment fund First Landing Fund LLC, which is co-controlled by individual defendants, Mark Finn and David Schippers (collectively, “First Landing”).
Prophecy utilizes a proprietary trading platform whereby it allows its “sub-advisors” to implement his or her own investment strategies. Prophecy shared in positive returns with sub-advisors, but any losses were allocated to the sub-advisors. Prophecy assured investors that it monitored its sub-advisors for risk, and required them to individually post collateral to cover any potential losses.
Plaintiff contends that Prophecy failed to adequately engage in risk monitoring and maintain collateral for two non-party sub-advisors. One sub-advisor purportedly ran a multi-million dollar Ponzi scheme, while the other sub-advisor lost hundreds of millions of dollars in high-risk investments. First Landing Fund allegedly operates as a “feeder fund” as all of its capital is invested in Prophecy.
Plaintiff investors seek to recover more than four million dollars it invested in First Landing based on First Landing and Prophecy’s negligence in maintaining the fund.