AlphaMetrix Saga Continues, CFTC Obtains Restraining Order Over Fraud

After falling under the NFA's wrath for failing to pay rebates to fund partners, the CFTC has received a court

alphametrix logoEmbattled Chicago-based AlphaMetrix Group, a commodity pool operator (CPO) and provider of hedge fund account monitoring solutions, is again falling under regulatory scrutiny. Operating a fund marketplace that matches the firm’s investors and partnering money managers, AlphaMetrix notified clients that it was experiencing financial difficulty and suspended rebate payments to managers. This led to the firm’s CFO exiting and an investigation from the NFA in regards to AlphaMetrix’s solvency, state of customer funds, and rebate payments to partners. The instability also led the NFA to announce that it would no longer use services from AlphaMetrix 360, the firm’s fund supervisory subsidiary.

Following an announcement in late October from the NFA that it was putting a November 1st deadline on AlphaMetrix to pay $600,000 in rebates to clients, the CFTC stated yesterday that they have obtained a restraining order against the firm. The complaint that was issued in U.S. District Court for the Northern District of Illinois, alleges that “AlphaMetrix misappropriated funds belonging to commodity pools it operated and sent false or misleading account statements to at least some of the pool participants.” The CFTC added that “On November 5, 2013, Federal District Judge Joan H. Lefkow issued a consent restraining Order that freezes AlphaMetrix’s assets, protects books and records, and appoints a corporate monitor to oversee the distribution of pool funds to participants.”

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The court complaint occurs as AlphaMetrix was reported by the NFA to be acting as a commodity pool operator (CPO) for 90 pools, with $700 million under management as of August 31, 2013. While initial allegations against AlphaMetrix were based on the firm’s failure to repay $600,000 in rebates, the current complaint alleges that the firm was involved with financial fraud and misappropriation. According to the CFTC’s complaint, between January 1st and October 31st, 2013, AlphaMetrix failed to reinvest $2.8 million in rebates it owed to participants, but instead transferred the funds to its parent group AlphaMetrix Group LLC. In the CFTC litigation, the regulatory is seeking ” A preliminary and permanent injunctions against AlphaMetrix, enjoining AlphaMetrix from committing further violations of the Commodity Exchange Act, as charged, and ordering it to pay restitution, disgorgement, and a civil monetary penalty, among other appropriate relief. The CFTC also seeks an Order requiring AlphaMetrix Group, LLC, to disgorge funds it received as a result of AlphaMetrix’s unlawful conduct.”

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