Wall Street & Technology is part of the Informa Tech Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.

Asset Management

11:54 AM
Connect Directly

SEC, CFTC charge Manager Who Boasted Success Amid Madoff Loss

The SEC has won an emergency asset freeze against a money manager who fraudulently lured clients with false boasts of his investment prowess despite major losses in Bernard Madoff's Ponzi scheme.

The U.S. Securities and Exchange Commission said it has won an emergency asset freeze against a money manager who claimed to invest $1.5 billion, and fraudulently lured clients with false boasts of his investment prowess despite major losses in Bernard Madoff's Ponzi scheme.

Nikolai Battoo, 41, was also charged with fraud by the Commodity Futures Trading Commission over his alleged scheme, which regulators said attracted at least $100 million from U.S. investors.

Regulators also accused Battoo of using the impact of last October's bankruptcy of commodities broker MF Global Holdings Ltd as an excuse not to meet investor redemptions.

According to the SEC, a Chicago federal judge has frozen the U.S.-based assets of Battoo and two of his companies, BC Capital Group SA in Panama and BC Capital Group Ltd in Hong Kong.

The CFTC also filed charges against these defendants, as well as against Switzerland-based BC Capital Group Holdings SA and U.K.-based BC Capital Management LLP.

"Battoo attracted quite a following of investors by proclaiming his investments withstood the test of the financial crisis," SEC enforcement chief Robert Khuzami said in a statement. "Reality seems to have finally caught up with him."

The SEC also charged Tracy Lee Sunderlage, 66, with helping Battoo raise money despite a previous industry ban.

It is unclear whether Battoo and Sunderlage have hired lawyers. According to court papers, Battoo lives in Switzerland but has maintained offices in Florida, where Sunderlage lives.

Battoo could not immediately be reached, and a call to a phone number listed for him in Florida was not answered.

A phone number for Sunderlage could not immediately be located, and an email to him was not immediately answered.

According to regulators, Battoo's scheme involved "an amorphous syndicate of far-flung funds, entities and affiliates," including commodity and hedge fund portfolios under the Private International Wealth Management name.

Regulators said Battoo concealed tens of millions of dollars of losses from his investments in "feeder funds" that sent money to Madoff, as well as losses in what the SEC called "fund-linked certificates."

Nonetheless, they said Battoo was able to attract new money by advertising market-beating returns.

According to court papers, Battoo touted an ability to "significantly reduce market losses when nearly everyone else is losing 35 to 50 (percent)," and make money in 2008 despite that year's financial crisis and uncovering of Madoff's fraud.

The SEC and CFTC said emergency action was needed to protect investors from further harm.

"The jig appears to be up," the SEC said in its complaint.

The cases are SEC v. Battoo et al, U.S. District Court, Northern District of Illinois, No. 12-07125; and CFTC v. Battoo et al in the same court, No. 12-07127.

Copyright 2010 by Reuters. All rights reserved.

Register for Wall Street & Technology Newsletters
Top Quotes of the Week
Top Quotes of the Week
It wasn't all bad luck for the capital markets this week: Hedge funds had a decent first quarter despite a slowdown in jobs numbers, BlackRock might be heading into new territory as hedge fund managers take a hard look at their counterparties, and the head of the IMF didn't pull any punches when assessing today's global economy. At least we can admire the nice weather and some of the best quotes of the week.