LexShares Case #281: A 73-Day Win
How a wealth management fraud case turned $75,000 into $134,295 in under 3 months
The Numbers
| Invested | $75,000 |
| Returned | $134,295 |
| Net Profit | $59,295 |
| MOIC | 1.79x |
| IRR | 1,741% |
| Holding Period | 73 days |
The Case
A professional athlete trusted a major bank’s wealth management team with his career earnings. What followed was a systematic fraud:
- Advisors executed unauthorized securities trades, pocketing commissions while hiding $45,000 in losses
- A team member’s brother sold the client $55 million in worthless life insurance, secretly kicking back half the $450,000 commission
- A “business consultant” introduced by the bank turned out to be a convicted financial predator using a fake identity — he stole $8.5 million through a compromised account
- The bank allegedly overrode security features, failed to file suspicious activity reports, and withheld documents to cover it up
Total losses exceeded $20 million. Two conspirators were criminally convicted — 5 years and 6 months respectively. The civil case sought to hold the bank accountable.
Timeline
| Date | Event |
|---|---|
| Jul 12, 2017 | Funded $75,000 |
| Jul 20, 2017 | Capital disbursed to plaintiff |
| Aug 28, 2017 | Settled — 39 days after funding |
| Sep 23, 2017 | Received $134,295 |
Why It Settled Fast
Criminal convictions were already in. Two defendants had pleaded guilty. The civil case wasn’t asking the jury to believe the fraud happened — it was asking them to hold the bank responsible for enabling it.
The bank had everything to lose. A public trial would air internal failures: overridden security controls, ignored red flags, missing regulatory filings. Settlement was damage control.
Trial was approaching. The February 2018 trial date created urgency. Defendants often settle once discovery is done and trial prep costs loom.
Return Breakdown
| Settlement | $1,500,000 |
| Fund Expenses | ($8,817) |
| Net to Fund | $1,491,183 |
| My Share (10%) | $149,118 |
| Carried Interest (20%) | ($14,824) |
| My Net Return | $134,295 |
What I Learned
Speed drives IRR. The 1.79x multiple is good but not exceptional. The 73-day holding period is what generated 1,741% annualized returns. A 2-year case with the same multiple would yield ~34% IRR.
Criminal convictions de-risk civil cases. When the underlying facts are already proven in criminal court, civil defendants face an uphill battle. Look for cases with parallel criminal proceedings.
Deep pockets enable settlements. A judgment-proof defendant can’t pay even if you win. Major financial institutions settle because they can — and because they want to avoid precedent-setting verdicts.
Short-term gains hurt. At 73 days, this profit was taxed as ordinary income. Factor tax treatment into expected returns, especially for quick resolutions.
This was my 7th LexShares investment. I had committed $75,000 to reduce a growing cash balance — breach of fiduciary duty wasn’t my preferred case type, but the underlying facts were compelling. Sometimes the best investments are the ones you almost skip.
