The founder of an advisory firm who claimed that artificial intelligence powered his hedge fund will spend 30 months in prison for defrauding investors of over $5.7 million.
Tampa, Fla.-based Mina Tadrus founded Tadrus Capital in 2020, but between September of that year and July 2023, he duped at least 31 victims (including family, friends and members of the Egyptian-American Coptic Christian community) in a Ponzi-like scheme.
Joseph Nocella, Jr., a U.S. Attorney in New York’s Eastern District, said the sentence served as a “reminder” to advisors to honestly manage investors’ funds.
“The defendant traded on excitement over the newest AI technology to trick investors to invest millions with his hedge fund,” Nocella said. “In the end, he perpetrated one of the oldest frauds in the book.”
Tadrus is a former FINRA-registered rep who briefly worked at T3 Trading Group. Before founding Tadrus Capital, he was also a derivatives consultant for a global financial institution.
Tadrus claimed his company would operate “the world’s first private high-yielding and fixed-income quantitative hedge fund” using AI “high-frequency trading models” that could yield as much as 30% annual returns.
According to the Department of Justice complaint, Tadrus touted the fund on his website, in the press, in podcasts and in YouTube videos while claiming that Tadrus Capital “takes an alternative approach that makes us recession-proof,” using “cross-asset diversification to decrease risk.”
However, Tadrus didn’t use AI-based algorithmic trading, with interns at the firm engaging in “paper trading,” simulated trades of securities as if an algorithm was being employed. According to the complaint, only $50,000 (or less than 1%) of the money Tadrus raised was used for “potential investment activities.”
In reality, Tadrus used about $1.7 million of the victims’ funds to pay other victims the monthly returns he’d promised, and to pay himself, employees and personal expenses, including credit card bills.
On Aug. 22, 2023, the SEC obtained a preliminary injunction and asset freeze against Tadrus and the hedge fund, centering on the same allegations. Tadrus pleaded guilty to federal charges in February of this year; in addition to the 30-month prison sentence, he was ordered to pay more than $4.2 million in restitution.
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