• Nikolai Battoo accused of fraud, failure to disclose losses
  • Judgment rendered after fund operator fails to fight lawsuit

A former Switzerland-based investment manager who put money into funds tied to Bernard Madoff’s fraud and blamed losses on the collapse of MF Global Holdings Ltd. is liable for almost $500 million in fines and restitution.

A U.S. judge in Chicago rendered the award on Jan. 11, more than three years after the U.S. Commodity Futures Trading Commission sued Nikolai Battoo and his businesses, accusing them of fraud. A former Florida resident, Battoo never contested the regulator’s lawsuit filed in September 2012, nor did he fight a parallel lawsuit filed in the same court on the same day by the U.S. Securities and Exchange Commission.

Battoo ran a group of investment businesses under the common banner of BC Capital Group. Through his firms, he persuaded about 250 “pool participants” to invest at least $140 million in his Private International Wealth Management portfolios, according to U.S. District Judge Edmond Chang.

“The defendants committed fraud in 2008 by failing to disclose the PIWM pools’ significant exposure to the Bernard Madoff ponzi scheme as well as trading losses suffered by other of Battoo’s hedge funds in which the PIWM pools were invested,” the CFTC said Wednesday in announcing the court’s ruling.

Battoo also misled his clients about either the value of his investment portfolios or the extent to which they were affected by the failure of MF Global, which filed for bankruptcy in 2011, according to the court.

Chang found the BC Capital entities and their principal liable for more than $294 million in restitution and $147 million monetary penalty and ordered them to disgorge $49 million in illegal gains.

The case is U.S. Commodity Futures Trading Commission v. Battoo, 12-cv-7127, U.S. District Court, Northern District of Illinois (Chicago).

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