The United States Commodity Futures Trading Commission (CFTC) filed a lawsuit against AlphaMetrics LLC on allegations that it misappropriated millions of funds that belong to its pool participants and deceived them by issuing fraudulent or misleading account statements.
CFTC alleged that AlphaMetrics failed to reinvest
The CFTC alleged that AlphaMetrics failed to reinvest approximately $2.8 million worth of rebates into the commodity pools it operates. The company signed an agreement with its pool participants to reinvest their rebate fees from January 1 to October 31 this year. Instead of reinvesting, the commodity pool operator transferred the money to the bank accounts of AlphaMetrix Group LLC (AMG), its parent company.
In its complaint, the CFTC emphasized, “As a result of this unlawful conduct, AMG received AlphaMetrix pool participant funds to which it had no legitimate interest or entitlement.”
The commission is requesting the court to order an injunction against AlphaMetrics to prevent it from violating the Commodity Exchange Act in the future. According to CFTC, the company operates around 90 commodity pools and it has approximately $700 million assets under management (AUM) as of August 31 of 2013.
The CFTC said, “Unless immediately restrained and enjoined by this court, AlphaMetrix is likely to continue engaging in the acts and practices alleged in this complaint, and additional pool participant funds may be misappropriated or otherwise dissipated.”
The commission is requesting the court to impose civil penalty, restitution, and accounting of assets and liabilities of Alpha Metrics.
AlphaMetrics was experiencing problems with cash flows
Last October, AlphaMetrics informed its clients that it was experiencing problems with cash flows, and terminated George Brown, its chief financial officer and brother-in-law of CEO Aleks Kins.
The company also announced that it would end trading activities in its commodity pools on October 31, and it would start liquidating its funds. Its previous statement reads:
“In light of recent redemption requests, AlphaMetrix has determined that its sponsored funds will no longer be able to effectively trade the investment strategy employed by each trading advisor. As a result, AlphaMetrix has decided that it is in the best interest of all investors for the funds to cease trading as of October 31, 2013, and enter into an orderly liquidation. For all investors who have not already redeemed, it is anticipated that AlphaMetrix will distribute 90% of the proceeds to investors on or about November 21, 2013. The balance will be distributed upon the completion of a final audit.”
AlphaMetrics also received an order from the National Futures Association to repay the rebate fees of its pool participants worth approximately $600,000 by November 1.