Western Asset Loses $120B after CIO’s Alleged Fraud Scheme

Ken Leech, WAMCO CIO, Indicted for Securities Fraud

According to various reports, Ken Leech, former Chief Investment Officer of Western Asset Management (WAMCO), has been indicted for securities fraud, investment adviser fraud, commodity trading adviser fraud, commodities fraud, and making false statements.

Leech allegedly engaged in a “cherry-picking” scheme from 2021 to 2023, allocating over $600 million in trading gains to favored clients while assigning equivalent losses to others, violating his fiduciary duty. His alleged actions benefited WAMCO’s “Macro Opportunities” strategy at the expense of its “Core Strategies.”

The alleged scheme was uncovered after his discretionary trading authority was revoked, revealing a pattern of biased trade allocations. If convicted, Leech faces significant prison time.

“Star Fund Managers” 

According to Investment News this week, Western Asset Management Company has faced massive outflows, losing at least $120 billion since the SEC disclosed its investigation into former co-CIO Ken Leech in August.

Franklin Resources, which owns Western, reported $68 billion in long-term net outflows in Q4 2024, with December seeing the heaviest losses.

According to the article, relying on star fund managers, is a trend asset management firms have tried to move away from in favor of team-based approaches. Historically, firms with high-profile managers—like Pimco with Bill Gross and TCW with Jeffrey Gundlach—have suffered significant outflows when those managers left.

How Cherry-Picking Works:

1. Placing Trades: The adviser executes multiple trades without immediately assigning them to specific client accounts.
2. Waiting for Market Movement: The adviser observes how the trades perform during the day.
3. Selective Allocation: Profitable trades are assigned to favored clients (such as high-value or insider accounts), while unprofitable trades are allocated to less favored or unsuspecting clients.

Why It’s Illegal:

• Breach of Fiduciary Duty: Advisers are required to act in the best interest of all clients, not just select ones.
• Misrepresentation: It creates an unfair advantage, falsely inflating performance for favored clients while harming others.
• Regulatory Violations: It violates U.S. securities laws, including the Investment Advisers Act and anti-fraud provisions.

Free Consultation with Investment Fraud Attorneys

This information is publicly available and provided by The White Law Group. If you are concerned about investment losses with your financial advisor, we may able to help you by filing a FINRA lawsuit. Please call the offices at 888-637-5510 for a free consultation.

The White Law Group is a national securities arbitration, securities fraud, and investor protection law firm with offices in Chicago, Illinois and Seattle, Washington.