The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The broker/dealer subsidiary of a BISX-listed company has been described by US regulators as “the pliant custodian” for an investment group accused of perpetrating an $140 million fraud, one investor alleging that it also failed to respond to its asset verification requests.

Legal documents filed in the US by the Commodities and Futures Commission (CFTC), which have been obtained by Tribune Business, allege that BC Capital Group and its principal, Nikolai Battoo, provided “false confirmations” of asset values to clients through Alliance Investment Management, the wholly-owned subsidiary of Benchmark (Bahamas).

And one investor, which transferred $96.5 million to an Alliance account for management by BC Capital Group, alleged that the Bahamian broker/dealer and its attorneys had, since May 2012, failed to respond to requests to verify the value of its assets.

Leah Bytheway, a director of Maven Assurance and Maven Life International, alleged in documents filed with the US courts that Alliance was “to serve as subcustodian” for funds invested with Battoo and entities in the BC Capital Group.

“The Mavens transferred the premiums and other funds that the BC entities managed on their behalf by having the funds wired to a bank account controlled by the subcustodian, Alliance Investment Management,” Bytheway alleged.

““It is my understanding that Battoo and the BC entities would manage the investment of the funds once they were under the control of Alliance and specifically designated for the benefit of [the Maven entities].”

Some $96.5 million was transferred by the Maven entities to BC Capital for management, and Bytheway added: “It is my understanding that auditors for [Maven] annually contacted Battoo and/or the BC entities and Alliance Investment Management as custodian to confirm the value of the assets being managed...., as well as details of the underlying investments.”

There is nothing to suggest that Alliance, Benchmark and their officers, directors or shareholders, have done anything wrong in relation to the BC Capital affair. They have not been charged with anything in the US court case.

But Julian Brown, Benchmark’s president and chief executive, previously confirmed when contacted by this newspaper that Nikolai Battoo and BC Capital Group had been clients of Alliance Investment Management, which had provided custodian-type services to their claimed scheme.

The CFTC is alleging that BC Capital Group induced investors to place funds with commodity pools called Private International Wealth Management (PIWM).

Some $140 million was said to have been invested in these pools since 2003, but the CFTC is claiming that Battoo and BC Capital Group had engaged in “a four-year series of misrepresentations and omissions” to hide mounting losses from 2008.

Assets and investments were overvalued, and BC Capital Group also avoided returning funds to investors.

The Bytheway documents alleged that since May 2012, Maven had “sent several confirmation letters to Battoo’s lawyers, Alliance Investment Management and Alliance’s lawyers seeking verification of the value of the assets managed by Battoo and the BC entities.

“Neither Battoo nor Alliance has provided the requested information to [the Maven entities].”

The CFTC itself alleged that asset values were hugely overstated by BC Capital, adding: “The third party administrator issued the asset verifications based on information purportedly provided by Alliance, the pliant custodian for Battoo and the BC entities......”

The CFTC added that BC Capital also provided “false confirmations to Maven’s auditors, both directly and through Alliance”.

Testimony by Gregory Adams, a BC Capital client, which is filed in the US courts, alleged that Alliance’s offices in downtown Nassau also had a PIWM sign, the BC Capital scheme brand, in its reception area.