Moving to curtail AlphaMetrix’ troubles from expanding, the National Futures Association (NFA) today ordered AlphaMetrix LLC “to satisfy its obligations to certain pool participants by Nov 1,” thus issuing a member responsibility action that if action isn’t taken, the NFA can suspend the member, restrict its operations or direct it to take “other remedial action.”
In a statement, the NFA said “The firm had deducted advisory fees for certain participants in commodity pools operated by the firm. Those fees were to be reinvested in the pools but were not. The total amount owed to participants is approximately $600,000. AlphaMetrix has approximately $700 million under management. According to NFA's action, if AlphaMetrix fails to satisfy its obligations by November 1, the firm would be prohibited from placing trades for any of its pools except for trades liquidating open positions. Further, any disbursement of pool funds could only be made with NFA's approval.”
Once recognized by Crain’s Chicago Business as a top entrepreneur, founder and CEO, Aleks Kins issued a letter on Oct. 10 admitting that the firm he launched , Alpha Metrix, was experiencing cash-flow difficulties. Managers and others affiliated with the platform say that the slow payments go as far back as 2009, perhaps indicating that the firm was never as healthy as perceived.
At one point the firm boasted in excess of 100 employees, but it is unclear how many of them remain on staff. George Brown, the chief financial officer, was removed from his post, as explained in the Oct. 10 letter, while Mikus Kins and Geoff Marcus, both senior staffers, departed in mid-October.
Founded in 2005, the firm was the brainchild of Kins and the platform was supposed to give investors access to fully vetted funds and, according to the website, “achieve a higher level of verified trust.” Touting its high levels of due diligence the firm hired former Secret Service members and formed AlphaMetrix Financial Investigations, which performed comprehensive background investigations on traders and advisers wishing to join the platform.
In 2010, the firm held its first summit at the Fountainebleu in Miami, with educational speakers and speed-dating for managers and investors. Harry Markopolis, best noted for his attempts to get the U.S. Securities and Exchange Commission to investigate Bernie Madoff, was the keynote speaker, discussing the red flags surrounding the Madoff fraud.
Subsequent conferences dropped the educational seminars and focused on speed dating and high-profile speakers such as Tony Blair. Weekend networking events were sponsored by AlphaMetrix including water sports at the Monte Carlo Beach Club; “Crepes and Croquet” at the former home of Karl Lagerfeld; and spouse packages that included South Beach (Miami) walking tours, spa treatments and champagne cabanas.
A manager who preferred anonymity noted that while he had attended their conferences because there were “real” investors there, he didn’t understand the math. “It wasn’t clear to me how they made money with the platform. The numbers didn’t seem to work.”