Nikolai Battoo has been telling investors for years that their investments with him have been showing remarkable success despite the global financial crisis. In reality, however, Battoo’s claims were blatant exaggerations, even, in some cases, downright lies. At least, that’s what the SEC alleged in a recent Complaint filed against Battoo and two of his companies, BC Capital Group S.A. based in Panama and BC Capital Group Limited based in Hong Kong, in U.S. District Court for the Northern District of Illinois last week.
“Nikolai Battoo claims to manage $1.5 billion on behalf of investors around the world, including at least $100 million for U.S.-based investors,” wrote the SEC in a Sept. 7 press release.
"But contrary to Battoo's proclaimed track record of exceptional risk-adjusted returns for his investors, he actually suffered major losses in 2008 due to his investments in the Bernard Madoff Ponzi scheme and a failed derivative investment program."
According to the Complaint, Battoo marketed himself as a highly successful alternative asset manager and attracted new money into his investment scheme by advertising market-beating returns, even after he lost more than $100 million in 2008. In Jan. 2009, for example, Battoo allegedly promoted his Private International Wealth Management (PIWM) portfolios by asking “How is it that PIWM-I can produce positive results or significantly reduce market losses when nearly everyone else is losing 35 to 50%?”
The Complaint also alleges that Battoo worked to conceal losses from his investors in a variety of ways, including through the arrangement of fraudulent “asset valuations.” According to the SEC, Battoo arranged the valuations in 2009 for the express purpose of reassuring investors their funds were safe and secure despite the ongoing financial crisis. The valuations, however, allegedly utilized false and backdated information, including the valuations of at least seven hedge funds that Battoo didn’t manage.
When investors began requesting redemptions late last year, Battoo allegedly came up with a variety of reasons to explain why he could not return the investors’ funds. These “excuses” allegedly included everything from the MF Global collapse to various government investigations.
“Battoo attracted quite a following of investors by proclaiming his investments withstood the test of the financial crisis, but reality seems to have finally caught up with him,” said Robert Khuzami, Director of the SEC’s Division of Enforcement. “Now, Battoo is offering investors one excuse after another for holding their money hostage.”
The SEC has obtained an emergency court order freezing Battoo’s U.S.-based assets, but the investigation into his affairs is “ongoing.” The CFTC also filed charges against the asset manager last week. For additional information about that case, click here.