Who To Sue When a Robot Loses Your Fortune

An anonymous reader shares a report: It all started over lunch at a Dubai restaurant on March 19, 2017. It was the first time 45-year-old Li, met Costa, the 49-year-old Italian who's often known by peers in the industry as 'Captain Magic.' During their meal, Costa described a robot hedge fund his company London-based Tyndaris Investments would soon offer to manage money entirely using AI, or artificial intelligence. Developed by Austria-based AI company 42.cx, the supercomputer named K1 would comb through online sources like real-time news and social media to gauge investor sentiment and make predictions on US stock futures. It would then send instructions to a broker to execute trades, adjusting its strategy over time based on what it had learned.

The idea of a fully automated money manager inspired Li instantly. He met Costa for dinner three days later, saying in an email beforehand that the AI fund 'is exactly my kind of thing.' Over the following months, Costa shared simulations with Li showing K1 making double-digit returns, although the two now dispute the thoroughness of the back-testing. Li eventually let K1 manage $2.5bn -- $250m of his own cash and the rest leverage from Citigroup. The plan was to double that over time. But Li's affection for K1 waned almost as soon as the computer started trading in late 2017. By February 2018, it was regularly losing money, including over $20m in a single day -- Feb. 14 -- due to a stop-loss order Li's lawyers argue wouldn't have been triggered if K1 was as sophisticated as Costa led him to believe.

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