{"id":23900,"date":"2016-01-14T13:54:04","date_gmt":"2016-01-14T19:54:04","guid":{"rendered":"http:\/\/news.medill.northwestern.edu\/chicago\/?p=23900"},"modified":"2016-01-14T16:35:48","modified_gmt":"2016-01-14T22:35:48","slug":"federal-judge-orders-commodities-trader-to-pay-nearly-500-million","status":"publish","type":"post","link":"https:\/\/news.medill.northwestern.edu\/chicago\/federal-judge-orders-commodities-trader-to-pay-nearly-500-million\/","title":{"rendered":"Federal judge orders commodities trader to pay nearly $500 million"},"content":{"rendered":"

By Steven Porter<\/strong><\/p>\n

Sanctions amounting to nearly half a billion dollars have been imposed upon an offshore commodity-pool operator who for years defrauded American investors, the U.S. Commodity Futures Trading Commission announced Wednesday.<\/p>\n

The penalty is the result of a 2012 civil complaint filed by the CFTC against Nikolai Battoo and his companies BC Capital Group S.A., BC Capital Group International Ltd. and BC Capital Group Holdings S.A. The companies, now liquidated, were based in the Bahamas.<\/p>\n

Battoo, a former Florida resident believed to be living in Switzerland, never responded to the suit, despite having been formally notified in 2013 of its filing, according to court records. His silence paved the way for a default judgment entered Monday by U.S. District Court Judge Edmond Chang in Chicago.
\n<\/p>\n

Describing some of the defendant\u2019s corporations as \u201cmere shells with no actual offices,\u201d Chang\u2019s 32-page order recounts numerous ways Battoo misled investors. He failed to disclose significant losses and repeatedly made misrepresentations, verbally and in writing, concerning the health of his clients’ investment portfolios, Chang wrote.<\/p>\n

According to the order, after the decades-long Ponzi scheme perpetrated by Bernard Madoff<\/a> was exposed in 2008, Battoo drafted a letter to investors, assuring them that the impact on their portfolios would be minimal despite \u201cindirect exposure\u201d to Madoff\u2019s scheme \u201cthrough a diversified hedge fund.\u201d In reality, between 7 percent and 20 percent of each client portfolio Battoo managed was invested in funds that ultimately invested in the Madoff scheme, leaving investors far more exposed than Battoo had let on.<\/p>\n

\"\"<\/p>\n

Then in 2011, Judge Chang went on, Battoo exaggerated the impact of MF Global Inc.\u2019s bankruptcy<\/a> on his client portfolios, using the misinformation to justify withholding investor funds.<\/p>\n

The defendant owes his victims more than $294.2 million in restitution, and he must relinquish $49 million in dirty money plus $147 million in civil penalties to the U.S. Department of the Treasury, Chang ruled.<\/p>\n

Michael Gorham, an industry professor of finance and director of the Center for Financial Innovation at the Illinois Institute of Technology Stuart School of Business, said civil penalties represent a core component of the CFTC\u2019s enforcement division.<\/p>\n

\u201cThe idea is to punish people who break the law and to create a deterrent for others who might be thinking about it,\u201d Gorham said.<\/p>\n

Even if it proves challenging to track Battoo down and extract payment from him \u2014 the CFTC\u2019s announcement warned victims that they may not get their money back \u2014 the judgment sends \u201ca big message to the whole investment world,\u201d Gorham added.<\/p>\n

After the civil complaint was filed in 2012, a judge froze Battoo\u2019s assets and appointed Robb Evans & Associates LLC as a receiver to manage the involuntary liquidation of the defendant companies.<\/p>\n

The CFTC does not earn a share of the penalties imposed, nor does it handle collections, spokesman Dennis Holden said, noting that his agency\u2019s actions are separate and distinct from those taken by the Securities and Exchange Commission.<\/p>\n

Battoo is permanently banned from direct or indirect trading in the exchanges CTFC regulates. Such lifetime bans are appropriate, Judge Chang wrote, when the defendant \u201cposes a threat to the integrity of the markets.\u201d<\/p>\n

Photo at top: Guards keep watch Thursday, Jan. 14, outside the Everett McKinley Dirksen U.S. Courthouse in Chicago. (Steven Porter\/Medill)<\/div>\n","protected":false},"excerpt":{"rendered":"

By Steven Porter Sanctions amounting to nearly half a billion dollars have been imposed upon an offshore commodity-pool operator who for years defrauded American investors, the U.S. Commodity Futures Trading Commission announced Wednesday. The penalty is the result of a 2012 civil complaint filed by the CFTC against Nikolai Battoo and his companies BC Capital […]<\/p>\n","protected":false},"author":183,"featured_media":23923,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[27,585],"tags":[680],"class_list":["post-23900","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business","category-winter-2016","tag-commodity"],"yoast_head":"\nFederal judge orders commodities trader to pay nearly $500 million - Medill Reports Chicago<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/news.medill.northwestern.edu\/chicago\/federal-judge-orders-commodities-trader-to-pay-nearly-500-million\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Federal judge orders commodities trader to pay nearly $500 million - Medill Reports Chicago\" \/>\n<meta property=\"og:description\" content=\"By Steven Porter Sanctions amounting to nearly half a billion dollars have been imposed upon an offshore commodity-pool operator who for years defrauded American investors, the U.S. Commodity Futures Trading Commission announced Wednesday. 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