The Aravali Fund was recommended by Deutsche Bank and other brokerage firms to income oriented investors who also sought to preserve their capital.
Deutsche Bank told it’s clients that the Aravali Fund was a safe investment that purchased investment grade or highly rated municipal bonds and acted as a municipal bond replacement fund. The Aravali fund was in fact a highly speculative fund engaged in a complex arbitrage strategy which involved a significant short position in treasury bonds, interest rate swaps and a leveraged pool of municipal bonds.
According to news sources, cases alleging losses of more than $10 million have already been filed.
One such investor alleged that their longtime investment adviser, Russell Smith, sent them a letter just before he killed himself, suggesting they contact his attorney, “for possible redress.”
The defendants are Deutsche Bank Alex Brown, Deutsche Bank Securities Inc., Arthur Kreidel, Mark Young, Aravali Fund LP, and Aravali Partners LLC. Mark Young is or was the president of Aravali Partners.
The investor families claim that Deutsche Bank and its defendant employees persuaded them through misrepresentations to invest $13 million in the “virtually ‘risk free'” Aravali Fund, then lost the money. Both families claim that Deutsche’s Bank misrepresentations of Aravali were so blatant it caused Smith, both families’ longtime financial counselor, to commit suicide in October.
The suicide letter, which was appended to the lawsuit, begins:
“Since you are reading this, I have just taken my life. It was necessary because the alternatives were totally unpalatable. I consider you a friend first and a client second. That said, I had a fiduciary relationship with you that charged me with putting your interest first. I can say that I always tried to do that. However, some of the investment recommendations that I chose did not work out the way I had anticipated. I regret that very much.
The Aravali Fund declined more than 90% and investors in the Fund have sustained significant damages.