LJM Funds Securities Settlement

This case is known as Sokolow v. LJM Funds Management, Ltd. et al., Case No. 1:18-cv-01039. The United States District Court for the Northern District of Illinois is in charge of the Action and is assigned to the Honorable Robert M. Dow, Jr., United States District Judge. This case is separate from the parallel state court class action pending in the Circuit Court of Cook County, Illinois.

This case arises from the collapse of the Fund in early February 2018. Lead Plaintiffs allege that the Fund was marketed to investors seeking lower risk and moderate growth through a conservative strategy that would preserve capital and avoid the risks of aggressive hedge funds seeking greater returns. The Fund offered shares to investors pursuant to Registration Statements and Prospectuses. These Offering Materials allegedly promoted the Fund as a low-risk and trend-neutral investment, with allegedly inaccurate statements. Lead Plaintiffs allege the Fund was, instead, overexposed to the risk of volatility and a down market through trading strategies that exposed investors to risks and losses of capital, even in only a moderately down market. The Fund was allegedly overexposed to the risk of volatility through leveraged options that required the Fund to liquidate its capital to pay off its positions when the market declined and volatility increased.

The operative complaint in the Action alleges violations of §§11, 12(a)(2), and 15 of the Securities Act of 1933 (“1933 Act”) on behalf of a class of all purchasers who bought shares of the Fund during the period from February 28, 2015 through February 7, 2018, inclusive, pursuant to Offering Materials.

Following extensive arm’s-length negotiations, the Lead Plaintiffs and the Settling Defendants reached an agreement to settle the claims in the Action for $12,850,000.00.

Settling Defendants have denied and continue to deny each and every one of the claims alleged by Lead Plaintiffs in the Action, including all claims in the Complaint.

In a class action, one or more persons or entities (in this case, Lead Plaintiffs) sue on behalf of people and entities who have similar claims. Together, these people and entities are a “class,” and each is a “class member.” Class actions allow the adjudication of many individuals’ similar claims that might be too small economically to bring as individual actions. One court resolves the issues for all class members at the same time, except for those who exclude themselves, or “opt-out,” from the class.

As part of the preliminary approval process, Lead Plaintiffs asked the Court to certify a class for settlement purposes only. The Settlement Class consists of persons and entities who purchased or acquired shares of the Fund during the period from February 28, 2015 through February 7, 2018, inclusive (the “Class Period”).

The Court did not finally decide in favor of Lead Plaintiffs or the Settling Defendants. Instead, the Settling Parties agreed to a settlement. Lead Plaintiffs and Lead Counsel believe that the claims asserted in the Action are strong. They recognize, however, the expense and length of continued proceedings needed to pursue the claims through trial and appeals, as well as the difficulties in establishing liability as to the Settling Defendants. For example, the Settling Defendants have raised arguments and defenses (which they would likely continue to raise in motions for summary judgment, and at trial) countering Lead Plaintiffs’ allegations, such as that the Settling Defendants acted in good faith and in a manner they reasonably believed to be in accordance with all applicable rules, regulations, and laws. In the absence of a settlement, the Settling Parties would present factual and expert testimony on each of the issues in dispute, and there is a risk that the Court or jury would resolve these issues unfavorably against Lead Plaintiffs and the Settlement Class. Lead Plaintiffs and Lead Counsel believe that the proposed Settlement is fair, reasonable, and adequate, and in the best interests of the Settlement Class.

Settling Defendants have denied and continue to deny each and every one of the claims alleged by Lead Plaintiffs in the Action, including all claims in the Complaint. Nonetheless, Settling Defendants have concluded that continuation of the Action as against them would be protracted and expensive, and have taken into account the uncertainty and risks inherent in any litigation, especially a complex case like this Action, and believe that the Settlement is in the best interests of Settling Defendants.

The Court directed, for the purposes of the proposed Settlement, that everyone who fits the following description is a Settlement Class Member and subject to the Settlement unless they are an excluded person or take steps to exclude themselves from the Settlement Class (see FAQ 12):

The Settlement Class includes:

all persons and entities who purchased shares of the LJM Preservation and Growth Fund during the period from February 28, 2015 through February 7, 2018, inclusive.

Yes. There are some individuals and entities that are excluded from the Settlement Class by definition. Excluded from the Settlement Class are:

1. Defendants and their affiliates;
2. the officers, directors, and/or trustees of LJM Funds Management, Ltd., Two Roads Shared Trust, Northern Lights Distributors, LLC, NorthStar Financial Services Group, LLC, or the Fund;
3. members of the immediate families of any such excluded person;
4. any firm, trust, corporation, or entity in which any Defendant has a controlling interest; and
5. the legal representatives, heirs, successors, and assigns of any excluded person or entity.

Also excluded from the Settlement Class is anyone who timely and validly sought exclusion from the Settlement Class in accordance with the procedures described in FAQ 12.

If you are still not sure whether you are included, you can ask for free help. You can contact the Claims Administrator toll-free at 1 (855) 915-0913 or at info@LJMFundsSecuritiesSettlement.com, for more information.

In exchange for the Settlement and the release of the Released Claims against the Released Defendant Parties (see FAQ 11), Settling Defendants have agreed to pay, or cause to be paid, $12,850,000, which, along with any interest earned, will be distributed at the conclusion of the Action and after deduction of Court-awarded attorneys’ fees and litigation expenses, Notice and Administration Expenses, Taxes, and any other fees or expenses approved by the Court (the “Net Settlement Fund”), to Settlement Class Members who send in valid and timely Claim Forms.

The Settlement does not resolve the claims against LJM Funds Management, Ltd., Anthony J. Caine, and Anish Parvataneni (the “Non-Settling Defendants”).

At this time, it is not possible to make any determination as to how much any individual Settlement Class Member may receive from the Settlement.

An individual Settlement Class Member’s recovery will depend on, for example: (a) the total number and value of claims submitted; (b) when the claimant purchased or acquired shares of the Fund; and (c) whether and when the claimant sold his, her, or its shares of the Fund.

By following the instructions in the Plan of Allocation, you can calculate what is called your Recognized Loss. Because the Net Settlement Fund is less than the total losses alleged to be suffered by Settlement Class Members, the formulas described in the Plan of Allocation for calculating Recognized Losses are not intended to estimate the amount that will actually be paid to Authorized Claimants. Rather, these formulas provide the basis on which the Net Settlement Fund will be distributed among Authorized Claimants on a pro rata basis. An Authorized Claimant’s “Recognized Claim” shall be the amount used to calculate the Authorized Claimant’s pro rata share of the Net Settlement Fund. The pro rata share shall be the Authorized Claimant’s Recognized Claim divided by the total of the Recognized Claims of all Authorized Claimants, multiplied by the total amount in the Net Settlement Fund. See the Plan of Allocation located at the end of the Notice for more information.

To qualify for a payment from the Net Settlement Fund, you must have submitted a timely and valid Claim Form, postmarked or submitted no later than December 11, 2019.

The Court held a Settlement Hearing on December 18, 2019 to decide, among other things, whether to finally approve the Settlement. On December 19, 2019, the Court found that the Partial Settlement was fair, reasonable, and adequate and in the best interests of the Settlement Class (you can view the Order and Final Judgment here). Please note that there may still be appeals. It is always uncertain whether these appeals can be resolved, and resolving them can take time, perhaps more than a year. It also takes time for all the Proof of Claim and Release Forms to be processed, including the process of identifying and attempting to cure defects in Proofs of Claim that were submitted by Settlement Class Members. Please be patient.

Unless you timely excluded yourself, you are a Settlement Class Member and will be bound by the Release of claims against the Settling Defendants and the Released Defendant Parties. That means you cannot sue, continue to sue, or be part of any other lawsuit against the Settling Defendants and the other Released Defendant Parties about the Released Claims. It also means that all of the Court’s orders about the Settlement will apply to you and legally bind you. The terms of the Release were included in the Notice.

“Released Claims” means any and all complaints, claims, third-party claims, cross-claims, counterclaims, demands, allegations, liabilities, obligations, promises, agreements, controversies, actions, causes of action, suits, rights, damages, costs, losses, debts, charges, and expenses (including Unknown Claims (as defined below) and attorneys’ fees, expert fees, and disbursements of counsel and other professionals) of any and every nature whatsoever, whether in law or in equity, whether arising under federal, state, local, or foreign statutory or common law or any other law, rule, or regulation (whether foreign or domestic), whether currently known or unknown, fixed or contingent, suspected or unsuspected, foreseen or unforeseen, ripened or unripened, accrued or unaccrued, liquidated or unliquidated, or matured or not matured, whether arising in equity or under the law of contract, tort, malpractice, statutory breach, or any other legal right or duty, whether direct, class, individual, representative, or in any other capacity, and to the fullest extent that the law permits their release in this lawsuit, that Lead Plaintiffs, or any other member of the Settlement Class: (a) asserted in the Action, or (b) could have asserted against any of the Released Defendant Parties in the Action or in any forum that arise out of, relate to, are connected with, or in any way concern (i) the allegations, transactions, facts, matters, occurrences, representations, or omissions involved, set forth, alleged, or referred to in the Action, or relating to actions or inactions with respect to the Fund, and that (ii) arise out of, are based upon, or relate to in any way, the purchase or acquisition of shares of the Fund during the Class Period. Released Claims does not include: (a) claims in any governmental or regulatory agency proceeding or action, including the right of any Settlement Class Member to recover therein; (b) claims asserted in: David Melcher v. LJM Partners, Ltd., et al., 2018 CH 10346 (Cook Cty Circuit Crt, IL), Donna Lundgren-Wiedinmyer v. LJM Partners, Ltd., et al., 2018 CH 10712 (Cook Cty Circuit Crt, IL), Barney C. Guttman v. LJM Partners, Ltd., et al., 2018 CH 12701 (Cook Cty Circuit Crt, IL); LJM Partners, Ltd. v. John Does, No. 19-cv-368 (N.D. Ill.); or (c) claims to enforce the Settlement.

“Released Defendant Parties” means the Settling Defendants, Settling Defendants’ Counsel, and each of their respective predecessors, successors, parent corporations, sister corporations, past, present, or future subsidiaries, affiliates, principals, assigns, assignors, heirs, legatees, devisees, executors, administrators, estates, heirs, spouses, immediate family members, receivers and trustees, settlors, beneficiaries, officers, directors, shareholders, employees, servants, agents, partners, insurers, reinsurers, representatives, attorneys, legal representatives, and successors-in-interest of the Settling Defendants. Released Defendant Parties does not include any of the Non-Settling Defendants.

To exclude yourself from the Settlement Class, you must have mailed a signed letter stating that you request to be excluded from the Settlement Class in Sokolow v. LJM Funds Management, Ltd., No. 18-cv-01039 (N.D. Ill.)”, so that it was received no later than November 27, 2019.

No. Unless you properly excluded yourself, you will give up any rights to sue the Settling Defendants and the other Released Defendant Parties for any and all Released Claims. If you have a pending lawsuit against any of the Released Defendant Parties, speak to your lawyer in that case immediately. You must have mailed your request for exclusion so that it was received no later than November 27, 2019, to be deemed as a valid request, unless the Court determines otherwise.

No, only Settlement Class Members are eligible to recover money from the Settlement.

Labaton Sucharow LLP and Robbins Geller Rudman & Dowd LLP are Lead Counsel in the Action and represent all Settlement Class Members. You will not be separately charged for these lawyers. The Court awarded lead Counsel their requested attorneys’ fees and expenses, to be paid from the Settlement Fund. If you want to be represented by your own lawyer, you may hire one at your own expense.

Lead Counsel have been prosecuting the Action on a contingent basis and have not been paid for any of their work. Lead Counsel applied to the Court and were awarded attorneys’ fees of 28% of the Settlement Fund, which will include any accrued interest. Lead Counsel also sought and were awarded litigation expenses incurred in the prosecution of the Action of no more than $25,869.93, plus accrued interest. The Court also granted awards to the Lead Plaintiffs of $10,000 in the aggregate in accordance with the PSLRA in connection with their representation of the Settlement Class. These attorneys’ fees and expenses awarded by the Court will be paid from the Settlement Fund. Settlement Class Members are not personally liable for any such fees or expenses.

The Deadline for objection has passed. Your objection must have been received no later than November 27, 2019.

Objecting is telling the Court that you do not like something about the proposed Settlement, the Fee and Expense Application, or the Plan of Allocation. You can still recover money from the Settlement. You can object only if you stay in the Settlement Class. Excluding yourself is telling the Court that you do not want to be part of the Settlement Class. If you exclude yourself from the Settlement Class, you have no basis to object because the Settlement no longer affects you.

The Court held the Settlement Hearing on December 18, 2019 at 9:15 a.m., in Courtroom 2303 of the United States District Court for the Northern District of Illinois, Everett McKinley Dirksen United States Courthouse, 219 S. Dearborn, Chicago, Illinois 60604.

On December 19, 2019, the Court found that the Partial Settlement was fair, reasonable, and adequate and in the best interests of the Settlement Class (you can view the Order and Judgment here).

No. You did not have to attend the Settlement Hearing. The Court considered all submissions, even if a Settlement Class Member did not attend the hearing.

The Settlement Fairness Hearing was held on December 18, 2019.

If you do nothing and you are a member of the Settlement Class, you will receive no money from this Settlement and you will be precluded from starting a lawsuit, continuing with a lawsuit, or being part of any other lawsuit against Settling Defendants and the other Released Defendant Parties concerning the Released Claims. To share in the Net Settlement Fund, you must have submitted a Claim Form (see FAQ 9). To start, continue, or be a part of any other lawsuit against the Settling Defendants and the other Released Defendant Parties concerning the Released Claims, you must have excluded yourself from the Settlement Class (see FAQ 12).

The Notice summarizes the proposed Settlement. More details are contained in the Stipulation. You may review the Stipulation filed with the Court or other documents in the case during business hours at the Office of the Clerk of the United States District Court, Northern District of Illinois, 219 S. Dearborn, Chicago, IL 60604. Subscribers to PACER, a fee-based service, can also view the papers filed publicly in the Action through the Court’s online Case Management/Electronic Case Files System at https://www.pacer.gov.

You can also get a copy of the Stipulation, and other documents related to the Settlement, as well as additional information about the Settlement by downloading it from this website here, or the websites of Lead Counsel, www.labaton.com and www.rgrdlaw.com. You may also call the Claims Administrator toll-free at 1 (855) 915-0913 or write to the Claims Administrator at LJM Funds Securities Settlement, c/o Epiq, P.O. Box 3058, Portland, OR 97208-3058.

Please do not call the Court with questions about the Settlement.

For even more detailed information concerning the matters involved in this Action, reference is made to the Stipulation, to the pleadings in support of the Settlement, to the Orders entered by the Court, and to the other papers filed in the Action, which are posted on this website here.

The Plan of Allocation (the “Plan of Allocation” or “Plan”) set forth in the notice is the plan that is being proposed by Lead Plaintiffs and Lead Counsel to the Court for approval. The Court may approve the Plan of Allocation or modify it without additional notice to the Settlement Class. The Plan of Allocation, located at the end of the Notice, can be found here.

The computations under the Plan of Allocation are only a method to weigh the claims of Authorized Claimants against one another for the purposes of making pro rata allocations of the Net Settlement Fund. An individual Settlement Class Member’s recovery will depend on, for example: (a) the total number and value of claims submitted; (b) when the claimant purchased or acquired shares of the Fund; and (c) whether and when the claimant sold his, her, or its shares of the Fund.

Any order modifying the Plan will be posted here and at www.labaton.com and www.rgrdlaw.com.

The CUSIPs for the LJM Preservation and Growth Fund are:

LJMAX: 90213U503

LJMCX: 90213U602

LJMIX: 90213U701

Acceptable supporting documentation includes trade confirmations, official monthly, quarterly, or year-end broker statements or other account statements to verify purchases, sales, or beginning or ending holdings. Include documentation to support each transaction. Share certificates may be used to support the amount of shares held at the beginning or end of the class period, but they are not evidence for when and how much the shares were purchased.

If you no longer have the supporting documentation, you should consult with your broker or financial advisor, who may be able to obtain the documents for you. In the event that you cannot locate your supporting documentation, you can ask your broker to write a letter on letterhead detailing purchases, sales, and beginning and ending holdings.

We recommend that you file your claim to the best of your ability, as accurately as possible. Ultimately, however, you may be required to provide independent supporting documentation to verify your claim.

There are two distinct class actions that have very similar case names, Sokolow v. LJM Funds Management, Ltd., et al. One case is pending in federal court, the U.S. District Court for the Northern District of Illinois. It has case number 1:18-cv-1039 (the “Federal Action” or just the “Action,” as it is referred to within this website). There is also a class action pending in state court, the Circuit Court of Cook County, Illinois, with case number 18-CH-11880 (the “State Action”). You can find the case number and court at the top of the notices and forms you receive about these cases. Both cases concern the LJM Preservation and Growth Fund.

Both class actions have partially settled and so notices have been mailed. Epiq is the Claims Administrator for the settlement of the Federal Action. A.B. Data, Ltd. is the administrator for the settlement of the State Action. A.B. Data’s contact information should be included in the notice and forms you receive about the State Action.

Yes, you may have participated in both settlements if you are a member of both classes. However, in order to be eligible for a recovery, you must have completed a Claim Form in both settlements and complied with the instructions for each case.

Please note that the claims filing deadline for the Federal Action pending in the U.S. District Court for the Northern District of Illinois was December 11, 2019.

If you are a member of both classes, then you have all the rights of members of the classes, as explained in the notices, and you will also be governed by the releases provided for in each settlement. Please see Question 11 above for information about the releases in the settlement of the Federal Action.

Look at the top of each notice/claim form. You can find the case number and court at the top of the documents you had received. The Federal Action has case number 1:18-cv-1039, and is pending in the U.S. District Court for the Northern District of Illinois. The State Action is pending in the Circuit Court of Cook County, Illinois, and has case number 18-CH-11880.

The definitions of the classes are listed in the notices that you received. For the LJM Funds Securities Settlement in the Federal Action, pending in the U.S. District Court for the Northern District of Illinois, the Settlement Class is defined as:

All persons and entities who purchased or otherwise acquired shares of the LJM Preservation and Growth Fund during the period from February 28, 2015, through February 7, 2018, inclusive.