Quote from monstercat:
no offense lescor but of course you'll defend the people you worked under for many years.i'd say the forensic accountant knows a bit more than you. nobody's accusing them of out right theft but at the least there books were lax as the sec says. THE QUESTION TO YOU LESCOR IS WHY DID THE SEC PICK ON TUCO AND NOBODY ELSE?WHY DID MIKE KESTLER NOT OWN TUCO AND WHY WOULD HE BASICALLY GIVE OWNERSHIP OF HIS COMPANY (EVO TRADING) TO DOUG FREDRICK? also no doubt tuco
knew the sec was investigating them yet they continued recruiting. lescor did you know the sec was investigating tuco before the formal charges? and lastly surely before charges were brought against tuco they had the opportunity to explain there position. HOW THE HELL DO YOU HAVE 290 TRADERS AND ONLY HAVE THE TRADERS DEPOSITS IN THERE ACCOUNTS? 10 MIL OF DEPOSITS IS ONLY 40 MIL BUYING POWER YET YOU'VE SAID YOU HAVE 70 MIL BUYING POWER ON OPENS ALONE. AND THEY USED AN OUTSIDE SOURCE FOR MARGIN CALLS WEEKLY. it all smells funny
No, I haven't inspected the company's books. Yes, I am basing my information on what I've heard first hand from Mike Kestler and Doug Frederick. I've known them both for several years, have stayed at their houses and condsider them friends. I have no reason to doubt what I've heard from them, but yes, it's possible I am being lied to, I just personally chose to believe what I've heard to this point.
Why did the sec pick on Tuco? Well, the sec does not actively seek out prop firms to investigate. They will only act when a complaint is filed with them and they are compelled to do so. So, someone complained about Tuco in some manner to the sec. They don't know where that came from, it could have been a pissed off former trader, or a disgruntled business associate with an ax to grind.
Keep in mind that Tuco was structured and operated in exactly the same manner as most non broker dealer prop firms do. The sec has known about this kind of operation all along and has let the firms be except when someone calls on them to investigate something. To my knowledge, the sec has not issued a formal opinion on these firms. Bob Green has written in the past they they are operating in some kind of regulatory grey zone. Joe Blow Trading LLC where you put up $10,000 and get 20:1 leverage with no licensing required has been very common for several years now. Are these firms breaking the law? The sec's stance on the Tuco situation makes it sound like any non registered broker dealer offering more than 4:1 and allowing daytrading in less than $25,000 accounts is. Yet there have been and continue to be probably more than 100 of these firms in existance and the sec has known about it all along.
My point is that Tuco was operating in a typical manner. The sec was required to investigate and they applied the letter of the law, simple as that. There was no criminal intent or fraudulent activity. If you want to bring down an entire firm, it's a simple anonymous phone call away.
As to your other questions, I do not know why the ownership of the firm was structured as it was. It's not my business and I never inquired. I didn't know of the investigation prior to the charges. I was a trader like everyone else, so why would I? It was business as usual until the day they were shut down. I pulled $100k out of my account just days before assets were frozen. If there was money issues, I would think there would be efforts to hold on to cash. I had over $100M in buying power, but that's not what I used for positions. I submit thousands of orders at a time, a tiny fraction of which are ever filled. 5 or 6 million on at a time is a lot and I am sure I was by far the biggest user of firm capital. All these firms (if they are smart) already have outside financing arrangements in place if they get margin calls. Tuco did regularly, it was part of their business plan and a regular, normal course of their business.
