The Chicago-based company runs a business known as a commodity pool operator, AlphaMetrix LLC, which lets customers invest in futures accounts managed by professional traders. The parent company told clients in a letter yesterday that both its liabilities and those of the commodity pool operator “greatly exceed” liquid assets and that the net asset values of some pools may be affected.
The revelations are another blow to confidence in the futures industry after it suffered two of its largest failures with the collapse of MF Global Holdings Ltd. in 2011 and Peregrine Financial Group Inc. a year later. In both cases, client money went missing.
“It’s a huge deal,” said John Lothian, a futures industry professional in Chicago who’s now chief executive officer of John J. Lothian & Co., which publishes a newsletter. “We’ve been trying to restore customer confidence after MF Global and Peregrine.”
The National Futures Association, an industry-funded regulator that monitors compliance with U.S. Commodity Futures Trading Commission rules related to protection of customer money and fraud, said it hasn’t uncovered evidence that customer money at AlphaMetrix is missing.
“There has not been an enforcement action taken” against AlphaMetrix, Karen Wuertz, a senior vice president at the Chicago-based NFA, said in a phone interview today.
Commodity pools gather money from clients to invest in futures and other derivatives. They let individuals invest in derivatives, a market dominated by institutions.
AlphaMetrix Group said in the letter to investors yesterday that it has not paid some of these professional traders even though the money to do so was removed from the commodity pools.
Conor Shea, a spokesman for AlphaMetrix, said in an e- mailed statement that he couldn’t immediately comment on where the withdrawn money from the company’s commodity pools was located. AlphaMetrix LLC had $146.6 million in client assets at the end of 2012, according to an Aug. 24 government filing.
AlphaMetrix Group “has recently encountered significant cash flow issues and is working to strengthen its current financial position and continued operations,” Aleks Kins, the chief executive officer, told clients in a letter yesterday.
The document also announced that the company’s CFO had been terminated and that Arthur F. Bell Jr. & Associates LLC, an accounting firm, was hired to review AlphaMetrix’s internal controls and recordkeeping.
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