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The CFTC states that the company misappropriated funds belonging to commodity pools and sent false or misleading account statements
AlphaMetrix, which was ironically marketed to investors as a safe-house against the likes of Bernie Madoff, finds itself in some hot waters. Based in Chicago, the US company provides customers with opportunities to invest in futures accounts run by professional traders and has a commodity pool operator under the name AlphaMetrix LLC.
The CFTC filed a complaint on the 4th of November against AlphaMetrix LLC for misappropriating at least $2.8 million and sending out false account statements to at least some of its customers. Between the 1st of January and October 31st the company has sent pool participants statements that their dividends have been reinvested, while in fact it has transferred funds to bank accounts of its parent company AlphaMetrix Group LLC.
The noise surrounding the company started last month when it announced that it was having cash-flow issues. In a letter to investors on October the 10th, the company informed investors that its liabilities were “greatly exceeding” its liquid assets. As Bloomberg reported the company then scrapped their CFO and committed its efforts towards obtaining liquidity to solidify its cash position. However the efforts have not resulted in much improvement.
Later in October the NFA mandated the company to return $600,000 to participants in commodity pools by November 1st, but on October 30th AlphaMetrix said it would stop trading in its commodity pool and file for liquidation.
According to the CFTC, AlphaMetrix has about $700 mln in assets under management. The statement released by the regulator claims that after the regulator has determined that the company has not reinvested at least $2.8 mln of some participants’ rebates on fees and instead transferred funds to to the parent company AlphaMetrix Group LLC, the CFTC looks for a fixed and permanent injunction. The alleged wrongdoing is that the company sent out statements to their clients misstating the true value of their investments.
Alphametrix has conceded to cooperate with the court as it coincides with the efforts of the company to return investors’ funds, however it denies any wrongdoing and states that it has not violated the Commodity Exchange Act.
For the full press release visit CFTC’s website here.
Following is the full text of AlphaMetrix’s spokesman response to the charges:
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.
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