Teenage hedge fund manager Jacob Wohl — nicknamed “Wohl of Wall Street” — had his first run-in with a regulator.
The National Futures Association (NFA) — a self-regulator for the US futures market — has issued a complaint against the 18-year-old and his (now former) firm, NeX Capital Management, alleging they failed to cooperate with the regulator in its attempted examination of the fund.
Back in June, the NFA tried to conduct an unannounced examination into Wohl’s NeX Capital, according to the NFA complaint. The NFA said its team showed up at an address listed for NeX that turned out to be a residence. The NFA said its team knocked on the door, but there was no response. They also didn’t receive a response to phone calls or an email they sent to Wohl that same day, according to the complaint. They visited the residence the following day, and even stopped by two more addresses, including his parents’ home, to attempt their examination.
At the time, Wohl’s father, David Wohl, sent the NFA an email accusing them of “stalking” and “harassing” his son, the complaint said. The email from his father went on to say he had had filed a formal complaint with the Los Angeles Police Department. He threatened to take out a “permanent restraining order” against the regulator, according to the email cited in the NFA complaint.
The NFA’s complaint said it was “abundantly clear” Wohl and NeX weren’t going to cooperate.
But that’s only the regulator’s side of the story.
Yahoo Finance reached out to Jacob Wohl for comment. His father, David Wohl, called us back instead.
In a telephone call with Yahoo Finance, Wohl’s father, David, who has practiced as a criminal defense lawyer for 27 years, gave a different version of events. He called the NFA’s complaint “frivolous” and “not professionally written.”
He also said that “two, maybe three guys” showed up “not dressed like professionals, wearing polo shirts and cargo shorts or something like they’re heading to the beach” and “ambushed” Wohl by “pounding on his door” with “no notice.”
Wohl’s father said his son lives in Hollywood Hills, a hilly area. He said that the NFA team members climbed up the hill adjacent to the home and “were peeking in the window like stalkers.”
Wohl said his son called him at the time and let him know what was going on. His son told him they were “tampering” with his mailbox. His son called the Los Angeles Police Department and filed a complaint.
“He’s got surveillance video of this. I let them know that,” his father said.
The elder Wohl, who practices law but not on behalf of Jacob’s company NeX, said he let his son know that the activity was not legal or in conformance with California law.
“If you want to send a subpoena you can do that. I’m not going to tolerate this regulatory thuggery, which is what they were displaying, in any way shape or form,” David Wohl said, adding, “This is the type of behavior that causes outrage toward the government … Are you kidding me? You guys just get the hell of his property. You send a letter or a subpoena. You do not ambush and stalk my son.”
He later added it was “completely outrageous” and “completely intolerable.”
“In Jacob’s case, I’m his dad, I know how ethical and honest he is. He’s a brilliant, brilliant kid. The dad side of me, doesn’t want him to be bullied and harassed. If you want to do something, legally, and you want documents, you don’t go to someone’s house and tamper with their mailbox, climb on a hill, pounding with no notice — you’d think we’re a third world — it’s a Chicago regulatory agency!”
We reached out to NFA for comment and received this response: “NFA does not comment on pending enforcement matters.”
From jock to stocks
Wohl first garnered attention in March 2015 when he was featured on local news channel KTLA as a high school jock-turned-hedge fund manager. At the time, he had been running Wohl Capital Management — which used a value investing stock picking approach — for about four months, according to the report.
Then a junior at Santiago High School in Corona, California, Wohl told the news channel that he was running the money of his friends’ parents, grandparents, aunts and uncles, as well as funds from some of his teachers. He said he had around 20 investors.
Shortly after, he made an appearance on a biotech stock panel on Fox Business Network.
In late 2015, he shifted trading strategies, taking a quantitative approach and applying for membership with the NFA in December for his new fund NeX Capital, the regulator’s website shows.
NeX Capital was registered on February 19, 2016. A few months later, NeX would withdraw its membership after the NFA attempted to examine the fund.
According to the regulatory complaint, dated August 19, the NFA came across Wohl after reading an article posted by value investing site ValueWalk entitled “High School Jock Turned Hedge Fund Trader — Is Regulatory Trouble Ahead?” The NFA said it came across the article as part of its internet surveillance program.
In April 2016, the NFA said it received promotional material that a potential customer had been provided. The material, according to the NFA complaint, included charts “that reflected substantial returns for a trading program offered by NeX Capital.” Afterwards, the NFA said it reviewed NeX Capital’s website, social media accounts, and YouTube videos and found them to be “unbalanced in their presentation of profit potential and risk of loss.”
‘At Least 20% Annual Returns’
Yahoo Finance also obtained a promotional document NeX Capital sent out in the form of a slide deck presentation dated January 2016. In the presentation, NeX said it’s a company that “executes a specialized quantitative strategy within a niche market with a high degree of edge over other traders.” The document also claimed that “NeX expects to deliver at least a 20% annual return to investors, while taking on less risk than common market benchmarks such as the S&P500.”
The slide deck said investors could withdraw their capital with a 45-day notice at no penalty. They could also view account statements on a daily basis.
In the terms of service section, NeX said it had a target AUM of $250 million. It also said it had a minimum investment of $250,000. The fund also said it would charge a 2.2% management fee with lower fees available for accounts over $5 million, and a 17% performance fee.
In the team section of the document, Wohl’s bio said that he had “10 years trading experience (including many different asset classes”, a “deep understanding of financial technology”, “5 years of programming experience (C++, Python, Java, VBA, R), “experience designing original trading strategies and risk-management systems,” and “Series 3 Certified.”
An investor loses money
In its request for information from futures commission merchants, the NFA found that there were two trading accounts controlled by Wohl. One was under the name of Wohl Capital and the other under the name Michelle Wohl, Jacob’s mom. These accounts had $260,000 in deposits, trading gains of $36,000 and $296,000 in withdrawals. They were open between April 2015 and October 2015, the complaint said.
The NFA’s complaint said it also received a complaint from a man named David Diedrich who claimed that Wohl refused to pay him back his investment and purported trading gains. According to the NFA, Diedrich claimed that Wohl asked him to invest in NeX Capital in December 2015, two months before his NFA registration as a commodity-trading-advisor (CTA) had been approved approved.
Diedrich also told the NFA that he made three deposits totaling $75,000 between March and October 2015. He also made a $35,000 wire transfer on October 16, 2015, more than week after Wohl Capital’s trading account was closed.
On December 14, 2015, Diedrich said, he received an account statement from Wohl that showed his investment was valued at $89,500. Diedrich requested several times that his investment and trading gains be returned, the complaint said.
In early February 2016, Diedrich received a check for just over $44,000, which was less than the $89,500 in the December 2015 statement, and less than his $75,000 initial investment.
The complaint noted that Wohl said the difference was due to “losses.” The complaint also said that Wohl’s trading account appeared to have made, not lost, money.
Wohl’s father told Yahoo that this example was “not pertinent” to the NFA’s investigation.
“That was completely resolved,” David Wohl said, pointing out that one client complained, it’s been resolved, and there have been no other complaints.
Wohl’s father also added that his son’s profits went up and down.
“He’s a smart guy. Above all, he’s honest and he’s ethical. He’s watched the ‘Wolf of Wall Street’ — he’s taken that as everything he doesn’t want to be… He’s the anti-Wolf of Wall Street and I’m really proud of him for that.”
The attempted NFA examination
Wohl’s father said that the NFA wanted to conduct a review. He said they had asked for documents and that Jacob believes he sent all the documents.
“I’ve been practicing law for 27 years. I’ve defended people. It’s criminal. What they did was criminal. They believed that they were entitled to more. Their response was to ambush him at home and do what they did,” the elder Wohl said. “That should scare anyone.”
The NFA said it commenced an unannounced exam on June 20, 2016. The regulator said NeX Capital’s address was a residential home. No one answered the door when they arrived, and various listed telephone numbers also went unanswered, according to the NFA. The team also emailed Wohl.
The NFA returned to the residence the following day. Again, there was no answer at the door, according to the regulator. The team did see a person on the second floor appearing to take photos or a video. A member of the team left a business card in Wohl’s mailbox, the complaint said.
The team then went to another address listed in NeX Capital documents only to find that it was the empty business school at La Sierra University.
They went to another address, Wohl’s parents’ house, in Corona, California. They said a boy answered the door and didn’t know where Jacob Wohl was.
David Wohl told Yahoo Finance that it was his 16-year-old son who answered the door. The elder Wohl also pointed out that their home in Corona, California is about 60 miles away from Jacob’s house.
About 20 minutes later, the NFA received a telephone call from Jacob’s father David Wohl.
According to the NFA, David Wohl threatened legal action against the regulator and said he planned to contact the Los Angeles Police Department. David Wohl also told the team “to stay away or else,” the complaint said.
“When they came to my house and started trying to interrogate my son, that’s where the line was permanently crossed,” David Wohl told Yahoo Finance, adding, that he “warned them” he would have law enforcement involved. He called the NFA a “typical out-of-control regulatory agency that are offended Jacob wouldn’t comply with their every demand.”
The NFA team sent Wohl and NeX another email reminding them that they’re obligated to cooperate with the examination under NFA Compliance Rule 2-5.
The rule states: “E ach Member and Associate shall cooperate promptly and fully with NFA in any NFA investigation, inquiry, audit, examination or proceeding regarding compliance with NFA requirements or any NFA disciplinary or arbitration proceeding. Each Member and Associate shall comply with any order issued by the Executive Committee, the Membership Committee, the Business Conduct Committee, the Appeals Committee or any NFA hearing or arbitration panel.”
An hour later, David Wohl emailed the NFA that NeX had withdrawn its NFA membership and the NFA didn’t have jurisdiction.
The timeline of when Jacob Wohl and NeX withdrew the membership is murky. Wohl’s father told Yahoo Finance it was before the NFA showed up to conduct its examination. NFA records show that the membership was officially with drawn on July 25, a month after the attempted exam.
In the email that David Wohl had sent the NFA, he wrote that they had been “stalking and harassing Jacob and our family repeatedly, at our homes” and “demanding a meeting that’s not going to take place under any circumstances.”
David Wohl also wrote that he had “initiated a formal complaint with the LAPD, and they are now investigating this matter” and that he would “also seek a permanent restraining order in court, the violation of which could result in criminal penalties.”
The NFA noted in its complaint that it’s “abundantly clear” that Jacob Wohl and NeX Capital had “no intention of cooperating” with its examination. They’re now asking him and his fund to issue a written answer in 30 days.
Wohl’s latest venture
Wohl’s latest venture is Montgomery Assets, which is described on its website as a “leading global asset management firm.”
The company’s website lists global locations including Beverly Hills, Dallas, Dubai, New York Chicago, Hong one, Geneva, Silicon Valley, all of which appear to be virtual offices.
When asked about the latest venture and why he stopped running NeX, Wohl’s father said his son has been “shifting, pivoting from business to business, expanding and diversifying.”
“He didn’t feel like being a member of NFA pertained to primary focus. Nothing more than that.”
He added that Jacob has “nothing but a bright future” and that he’s really proud of him.
Julia La Roche is a finance reporter at Yahoo Finance.