BULLETIN: SEC: Asset Manager Hid Madoff Losses, Boasted ‘Benchmark-Beating Returns,’ Recruited New Investors, Missed Redemptions — And Blamed MF Global Collapse

EDITOR’S NOTE: Scams undermine faith in legitimate markets. This is a case in which a purportedly legitimate asset manager allegedly is using the sort of explanations/excuses commonly used by Ponzi-forum hucksters.

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BULLETIN:The SEC has gone to federal court in the Northern District of Illinois, alleging that asset manager Nikolai Battoo duped investors by hiding losses in the Bernard Madoff Ponzi scheme, recruited new investors and boasted about “benchmark-beating returns.”

But Battoo, who claimed to have $1.5 billion under management, has not met redemption requests — and now claims his inability is due to the collapse of MF Global, the SEC said.

Also charged was Tracy Lee Sunderlage, “an unregistered broker-dealer who was banned from the industry in a previous SEC enforcement action,” the SEC said.

From the SEC complaint:

In 2008, Battoo and his company-defendants lost tens-of-millions  of dollars investing in Madoff “feeder funds.” That same year they lost more than $100 million when an international bank terminated Battoo’s access to its credit and platform of funds. Yet Battoo-has not been forthcoming with his investors about the extent of — or in some cases even the fact of — these losses. His statements to clients omit his staggering losses. In the wake of such deception, existing clients have invested fresh investment proceeds. Battoo’s falsified track record of benchmark-beating returns has also won him new investors.

The jig appears to be up. Clients are now clamoring for redemptions, so Battoo has doubled-down on his deception. He’s blamed the MF Global calamity for his inability to repay investors. But when the SEC sought support for such claims, he declined to provide further information. At other times Battoo has blamed unnamed counterparties for freezing his assets because of unspecified government investigations. He told one investor that his attorneys were negotiating a “release” with the SEC. These statements are lies.

A federal judge, the SEC said, has granted an emergency freeze of assets belonging to Battoo and two of his companies: BC Capital Group S.A. of Panama Panama and BC Capital Group Ltd. of Hong Kong.

The SEC action is designed to protect U.S. investors, the agency said.

Battoo claims to manage $100 million for U.S. investors, the agency said.

“Battoo attracted quite a following of investors by proclaiming his investments withstood the test of the financial crisis, but reality seems to have finally caught up with him,” said Robert Khuzami, director of the SEC’s Division of Enforcement. “Now, Battoo is offering investors one excuse after another for holding their money hostage.”

Read the remarkable complaint.

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