The sudden death of Chris Callahan, a hedge fund executive, has exposed deep troubles within his firm, Traynor Ridge Capital Inc. Callahan, who was supposed to be celebrated for his firm’s top-notch performance at the annual Canadian Hedge Fund Awards, didn’t attend the event and was found dead a week later. His death led to a widening investigation into his firm, which had incurred tens of millions of dollars in losses due to bad bets on cannabis and energy companies.
One of those companies is Trillion Energy International (CSE: TCF) (OTC: TRLCF), the brutal selloff causing the stock to drop from 0.60 to hit an intra-day low of 0.22 on October 30th. Trading in Trillion stock has been highly volatile since then, bouncing back to 0.58 before settling back to close at 0.45 today.
Speculators on the street are pegging a strong recovery in Trillion Energy, whose shares have a 52-week high of $2.60.
More on Traynor Ridge’s implosion
Traynor Ridge was sinking under the weight of these bad bets, leaving three brokerage firms with nearly $100 million in losses. Regulators, including the Ontario Securities Commission, are investigating the matter. One market-maker, Virtu Financial Inc., has filed a lawsuit to recover its losses. Echelon Wealth Partners Inc., a Canadian money manager, was one of the firms caught up in the losses but managed to sell the positions and is no longer exposed.
Traynor Ridge’s clients, especially those associated with Westcourt Capital Corp., have their investments stuck as securities regulators have prohibited trading by the fund, citing its “serious financial difficulty.” Callahan’s death left the fund without anyone in charge, as he held all critical roles within the firm, including director, shareholder, and chief compliance officer. The fund’s risky trades and failed transactions led to significant losses and raised concerns about the fund’s governance structure. The investigation is ongoing, and the situation has shocked the industry.