The US Commodity Futures Trading Commission has filed an emergency court action to freeze assets under the control of Nikolai S Battoo, BC Capital Group, BC Capital Group International, BC Capital Management and BC Capital Group Holdings.
The action also seeks an order appointing a receiver for the BC Common Enterprise and related entities, prohibiting the defendants from destroying books and records, and granting the CFTC immediate access to evidence.
The CFTC’s complaint alleges that defendants operated a series of commodity pools called “Private International Wealth Management” (PIWM) that solicited more than USD140m from US residents. The complaint also alleges that defendants made fraudulent misrepresentations and omissions in connection with significant losses sustained by the PIWM pools through periodic account statements and asset verification documents as well as through telephone calls and letters to pool participants.
Specifically, defendants allegedly committed fraud in 2008 by failing to disclose the PIWM pools’ significant exposure to the Bernard Madoff Ponzi scheme, as well as trading losses suffered by other of Battoo’s hedge funds in which the PIWM pools were invested. In 2009, defendants sent asset verifications to pool participants that the CFTC alleges overstated the value of the PIWM pools’ investments. Finally, in 2011, defendants allegedly overstated the impact that the bankruptcy of MF Global had on the PIWM pools and used it as an excuse for refusing to return pool participants’ funds.
In the continuing litigation against the defendants the CFTC seeks a permanent injunction from future violations of federal commodities laws, permanent registration and trading bans, full restitution to defrauded pool participants, disgorgement of any ill-gotten gains, and the payment of appropriate civil monetary penalties.