As AlphaMetrix closes its trading operations, the Commodity Futures Trading Commission filed charges against the firm earlier this week alleging it had violated the Commodity Exchange Act. AlphaMetrix now is denying those charges as it cooperates with the Court.
Filed in Federal Court in Chicago, the suit alleges AlphaMetrix committed fraud by misappropriating at least $2.8 million belonging to pool participants from Jan. 1 through the end of October. According to court documents, AlphaMetrix had made agreements with pool participants to reinvest rebates into pools it was operating.
“Instead, Alphametrix transferred these funds from accounts held in the name of commodity pools that it operated into bank accounts held in Alphametrix’s name,” and from there into bank accounts held by its corporate parent, Alphametrix Group LLC, the CFTC alleged.
In response to the charges, an AlphaMetrix spokesman released the following statement:
On November 5, 2013, the Federal Court in Chicago entered a Consent Statutory Restraining Order sought by the CFTC. AlphaMetrix agreed to the entry of the Order because it is consistent with its efforts to liquidate and return the funds. AlphaMetrix denies the allegations that it violated the Commodity Exchange Act as alleged in the complaint filed by the CFTC.
The Order appointed a Corporate Monitor for all commodity pools operated by AlphaMetrix. The Corporate Monitor is directed and authorized to ensure that at least 95% of pool participant funds are retuned to participants by no later than fifteen (15) days from the entry of the Order. AlphaMetrix will cooperate with the Corporate Monitor.
It is anticipated that additional pool participant funds will be released once tax, audit and other such service fees are estimated and accrued for as directed by the funds offering memorandum. AlphaMetrix is currently communicating with Deloitte to engage them to complete final audits. Deloitte has audited funds for AlphaMetrix since 2008.
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.