A US District Judge has spared Owen Li, the hedge fund manager convicted of securities fraud, a prison sentence and instead sentenced him  to probation.

Owen Li

More Lenient Sentencing that first intimated

Owen Li, a New York hedge fund manager, founded Canarsie Capital and lost nearly all the $57 million he had under management within weeks.  He was expected to serve five years, as reported here on March 29th but the judge decided to take a more lenient approach.

Full admission and assistance to prosecutors

The judge made reference to how quickly Li both admitted his crimes and the amount of assistance he gave prosecutors.

Judge Robert Sweet told his Manhattan courtroom his verdict which prompted gasps from the crowd gathered and Owen Li turned and hugged his defense lawyer, Scott Resnik.

“You have done all a human being could do to go take responsibility and to clean up the tragedy,” Sweet said to Li. “Perhaps the lesson that comes out of this sentencing should be that there is redemption, and there is grace.”

Li, a Stanford graduate, who is now 30 years old but 28 when the crimes were committed had pleaded guilty in December last year to both securities fraud and false statement.

Securities Fraud and False Statement

Li had moved nearly all of Canarsie Capital’s assets into long, unhedged market index options, and when the market moved against him he suffered immense losses. Li overstated the funds performance to investors and told misleading information to the US Securities and Exchange Commission about a number of his trades.

In Li’s defense, Resnik stated that he had chased after his losses with more bad trades due to a ‘flawed’ psyche, having spent time working in the markets for demanding fund managers, he had come to see perfection as a requirement.

Prosecuting, Assistant US Attorney Michael Ferrara seemed caught in two minds. He said that prison was needed as a deterrent to other would be rogue traders, that to “lose 50-odd million dollars and lie to your investors” was not acceptable behavior. But he also added, that Li’s “exceptional” assistance had made the case a lot easier, explaining that he had come forward with all information about his trades and what lies he had told.

Prior to sentencing Li stated,  “My misconduct was, and is, my responsibility to bear alone.”

Li looks forward to trying to rebuild his life his lawyer said afterwards.