SEC CHARGES BAHAMAS-BASED BROKERAGE WITH FRAUD

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 

The Securities and Exchange Commission charged a Bahamas-based brokerage firm and its president for enabling a fraud that was halted when the SEC charged the hedge fund manager at the center of the scheme.

The SEC alleges that Julian R. Brown and his firm Alliance Investment Management Limited (AIM) purported to be the “custodian” for assets under the management of Nikolai Battoo.  The SEC obtained a court-ordered freeze over Battoo’s assets after charging him in 2012 with defrauding investors around the world by hiding major losses while falsely boasting that their investments were performing remarkably during the financial crisis. 

According to the SEC’s complaint filed today against Brown and AIM in federal court in Chicago, they misrepresented themselves to investors as Battoo’s custodian when, since at least 2009, their firm did not have custody of most of the assets listed on investor account statements.  Brown and AIM allowed Battoo to create false account statements on AIM letterhead that vastly overstated the value of investors’ assets by more than $150 million.  Brown and AIM then routinely provided the false account statements to auditors and others acting on behalf of Battoo’s investors. 

The SEC further alleges that Brown and AIM permitted Battoo to misappropriate at least $45 million of investor funds by transferring money at Battoo’s behest from investor accounts to Battoo’s direct control.  Battoo used investor funds to pay AIM and Brown more than $5 million in return for their critical assistance.

“We allege that Brown and his firm enabled Battoo’s scheme by providing investors with false assurances about who was holding their money and how much money they had in their accounts,” said Timothy Warren, associate director of the SEC’s Chicago Regional Office.

The SEC’s complaint alleges that Brown and AIM violated Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5, and aided and abetted Battoo’s violations of the antifraud provisions of the federal securities laws. 

The SEC’s investigation, which is continuing, has been conducted by John D. Mitchell in the Chicago office, and assisted by Carlos CostaRodrigues, Marianne Olson, and Alberto Arevalo in the agency’s Office of International Affairs.  The litigation will be led by Daniel J. Hayes.  The SEC appreciates the assistance of the Securities Commission of the Bahamas, British Virgin Islands Financial Services Commission, and Guernsey Financial Services Commission.