After incurring $8.3 million in trading losses for his $30 million Opulent Lite hedge fund - just in February 2008 - this SF-based hedge fund manager proceeded to commit a Cardinal Sin on Wall Street:  he didn't "cut his losses."  For the remainder of 2008, Neil Godbole unsuccessfully tried to “make up” the loss.  In the end, Opulent Lite suffered a total of $14.5 million in trading losses in 2008.

Godbole covered up the losses from investors throughout 2008 by misstating both trading results and the fund’s assets in materials he authored and sent to investors.  In February 2009, he finally "came clean" with investors, who en masse, sought to withdraw their funds.  By March 2009, the fund was liquidated.

    The Respondent's Rollover Strategy.   Aged 29, Godbole was sole principal and owner of Trueblue Strategies - an adviser registered with California - and was wholly responsible for managing Opulent Lite - including its trading, investor communications and record-keeping.  He holds a Series 65 license. 

In an effort to recoup his February 2008 losses, and to stem further losses, Godbole began to use what he called a “rollover” strategy.  Prior to 2008, Godbole ended each monthly trading period fully in cash. In 2008, however, he began to open option positions toward the end of the trading period.  Instead of expiring at the end of the monthly trading period, the option contracts had expiration dates extending into the next trading periods.  The “rollover” strategy did not, in fact, stem losses. 

Throughout 2008, Godbole continued to misrepresent the fund’s trading results and asset value - repeatedly underreporting Opulent Lite’s trading losses to investors.  Even in the few months when the fund experienced gains, Godbole underreported those gains, which allowed him to smooth the fund’s returns and conceal the losses he had failed to report previously.  By December 2008, Godbole reported fund assets as being in excess of $26 million, when they had actually fallen below $14.4 million.

    Compounding the Errors.  His actions throughout 2007 caused other problems.  First, the fund paid his management fees based on the inflated fund value. Second, fund redeemed units at the inflated value, to the detriment of investors who remained in Opulent Lite as well as the fund itself.

As a result of the conduct described above, Godbole willfully violated Sections 206(1) and (2), which prohibit fraudulent and misleading conduct by an investment adviser. He also willfully violated Section 206(4) and Rule 206(4)-8 thereunder by providing false information to the fund’s investors. 

A $40K civil penalty was levied against Mr. Godbole.   [SEC IA Act Release 3117, 12/1