Labor & Employment Law Daily Wrap Up, LITIGATION NEWS, TRENDS—Compliance officer, fired for exposing potential violations, sues former employer, (Nov 10, 2025)

By Rebecca E. Hoffman, J.D.

The hedge fund’s senior officers repeatedly told the plaintiff he was not sufficiently “commercial” in his role, and warned him of repercussions.

The chief compliance officer at a hedge fund, concerned about potential violations of SEC regulations and breaches of fiduciary duties to investors, pressed for resolution of these issues, but met resistance and condemnation from senior management. After the plaintiff was terminated, he brought the instant action alleging retaliation for whistleblowing activity under NYLL Section 740 (Abramov v. Capula Investment US LP, No. 1:25-cv-09163 (S.D.N.Y. Nov. 3, 2025)).

The plaintiff worked for the Capula group from mid-2012 to mid-2025. At the time of his termination, he was serving as U.S. Chief Compliance Officer and Head of U.S. Compliance and Legal. He alleged that “management, officers, and principals of Capula [regularly] attempted to restrict and impede” the plaintiff from fulfilling his function, “including his ability to ensure regulatory compliance and protection of investor funds, such as in the areas of fund management, fund administration, and trading.”

Pass-through expenses. For example, Capula created a fund with a “pass-through expense” structure, whereby investors could be charged amounts over and above the capped management fees investors typically paid. Capula used this structure to recruit portfolio managers and offer them multi-million-dollar compensation packages. Investors were convinced to invest in a fund with an uncapped expense structure with the promise of portfolio managers who were worth such high salaries and “would ostensibly deliver stronger returns for the investors,” the complaint stated.

The plaintiff explained to upper management at Capula, on multiple occasions, that the SEC’s “stringent regulations” required explicit disclosure of these expenses before exacting them. He was directed to conduct an audit of the process “going forward” of charging expenses to fund investors, but was not permitted to access past data. “Plaintiff became aware that management was concerned that the expenses charged to date could be seen as outside the disclosures that had been made to investors and that the [audit] could have been initiated as a cover for such practices.”

Upon his continued urging that investors receive information regarding expenses going forward, along with instructions that they be notified about past charges to comply with their fiduciary duties to these clients, “Plaintiff was told he was raising immaterial issues and was referred to on multiple occasions as not ‘commercial,’” the complaint explained. He was left out of discussions, received negative performance reviews, and was told to “dramatically change his ‘inflexible’ compliance approach.”

‘Cross trades’ and ‘test trades.’ The complaint also details Capula’s cross trades between funds. The plaintiff discovered that these trades were not being conducted in a fair and equitable manner as required by organizational policy as well as SEC regulations. Capula also launched a strategy involving “test trades,” which had functionality issues and raised concerns. When the plaintiff called a halt to these trades until the issues were resolved, he was met with upper management backlash. The day after he went to the CEO and chief legal officer with his worries over compliance and retaliation threats, the plaintiff was fired.

The plaintiff is alleging that Capula violated NYLL Section 740 based on management’s pattern of pressure and intimidation, attempting to coerce him into violating regulations and dodging his responsibilities. He is seeking actual and compensatory damages, pre- and post-judgment interest, punitive damages, fees, and costs.

The case is No. 1:25-cv-09163.

Companies: Capula Investment US LP; Capula Investment Management LLP

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