AlphaMetrix

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AlphaMetrix
AlphaMetrix.gif
Founded May 2005; defunct since 2013
Headquarters Chicago
Key People Aleks Kins, President and CEO
Website www.alphametrix.com

AlphaMetrix, LLC was an independent managed account platform for hedge fund investing that collapsed in 2013 amid allegations of misappropriation of funds and "issuing false or misleading account statements to conceal fraud."[1] Its offerings included managed account structuring and operations, data analytics and portfolio building, and manager due diligence.

Prior to its bankruptcy, the firm had approximately 75 employees across offices in Chicago and New York, and at its peak operated about 90 commodity pools with $700 million in assets under management. In November 2013 the CFTC filed a fraud lawsuit against the firm, and in April 2014, Barnes & Thornburg, which was appointed as receiver to the defunct AlphaMetrix, sued the company's top officers, CEO Aleks Kins, risk officer Charley Penna, COO David Young, strategy officer Geoff Marcus and CFO George Brown.[2]

History - Before the Fall

AlphaMetrix was founded in 2005 and began ramping up quickly, expanding it Chicago office twice in two years and adding a New York office in 2010. By August 2010, with $2.2 billion on its managed account platform, was ranked the 7th fastest growing firm of Inc. Magazine’s 2010 Inc. 500.[3]

It was around this time that AlphaMetrix revealed plans for an aggressive expansion into the traditional hedge fund space. It added its first non-CTA fund, a long/short equity vehicle, to its managed accounts platform and announced plans to grow its hedge fund pool aggressively, with a target of 60 hedge funds by the end of the year.[4]

AlphaMetrix acquired Spectrum Global Fund Administration in December 2010 and introduced a mutli-administrator hedge fund platform to allow investors to choose from a pre-approved list of administrators. The acquisition also enabled the firm to create AlphaMetrix360, a suite of fund administration services targeting hedge fund managers. [5]

In June 2011, AlphaMetrix was named the number one fastest growing firm by Crain's Chicago Business. The firm saw 8.030% revenue growth in a five year period. [6]

In November 2012, AlphaMetrix360, LLC was selected to provide electronic data aggregation services for both CME Group and the National Futures Association (NFA). As futures industry self-regulatory organizations, the initiative allowed CME and NFA to build a system to collect balances for all bank depositories holding customer segregated, secured amount and sequestered funds on behalf of futures commission merchants on a daily basis.[7]

Lavish Events

In 2008, AlphaMetrix held its first event, called the AlphaMetrix Summit and Charity Golf Invitational. In 2010 the firm hosted its first Miami summit and, in 2013 it hosted its first European event in Monaco. [8] Though the events featured one-on-one meetings between fund managers and capital allocators, the events were known through the industry for lavish parties, big-name entertainment and prominent speakers.[9] Notable speakers and entertainers included former U.K. Prime Ministers Gordon Brown and Tony Blair, Harry Markopoulos (whistleblower in the Bernie Madoff case), rock band Blues Traveler and R&B singer CeeLo Green. Though the events group was reported to be a money-maker for AlphaMetrix, others have reported that cost overruns from events in Monaco and Miami contributed to AlphaMetrix's downfall.

The event business was sold to Contect Summits in 2013. Context, which employs ex-AlphaMetrix staffers Mark Salameh and Geoff Marcus, continues to operate summits in Miami, Las Vegas and Southern California.[10]

Significant "Cash Flow Issues"

CME Group and the NFA cancelled the data aggregation contract it had with AlphaMetrix in October 2013, as Alphametrix announced in a letter to clients that it had "recently encountered significant cash flow issues and is working to strengthen its current financial position and its continued operations."[11] The company subsequently fired its chief financial officer and hired accounting firm Arthur F. Bell Jr. & Associates LLC to review internal controls and recordkeeping. [12]

The NFA barred AlphaMetrix from taking in any new investments until it repaid $600,000 in rebate fees to participants in its commodity pool.[13] On October 30, 2013, AlphaMetrix Group announced it would begin liquidating its sponsored funds the following day. [14]

On November 4, 2013, the CFTC sued AlphaMetrix, accusing it of misappropriating at least $2.8 million and issuing false or misleading account statements to conceal fraud. The CFTC said AlphaMetrix had agreed to rebate fees to participants in its commodity pools by reinvesting those sums in the pools, but instead had transferred the money to bank accounts of its parent AlphaMetrix Group LLC ("AMG").[15]

In April 2014, the receiver appointed to AlphaMetrix, Barnes & Thornburg, sued the company and its top officers for $19 million, saying they used the firm "as their own piggy bank.".[16]

In December 2014, the CFTC settled its case with AlphaMetrix. Under the terms of the settlement, the firm must pay restitution of $2.8 million, plus a civil penalty of $2.8 million. Priority is given to returning funds to investors, managers and vendors, making it likely that the civil award will not be paid.[17]

Products and Services

  • Managed Account Structuring & Operations
  • Real-time Transparency & Technology
  • Hedge Fund Due Diligence
  • Hedge Fund Database of 2,000+ Liquid Alpha Strategies
  • Background Checks & Financial Investigations
  • 24-Hour Risk Management & Monitoring (during trading days)
  • Custom Portfolio Analysis

Key People

Aleks Kins, President and CEO
Ranjan Bhaduri, PhD, Chief Research Officer
Michael Evans, Chief Technology Officer
David Fisher, Chief Security Officer
Geoff Marcus, Chief Strategic Officer
Lisa M. Tamburini, General Counsel
David Young, Chief Operations Officer
George Brown, Chief Financial Officer
Mark Faulkenberg, Executive Director, Global Operations
Charley Penna, Chief Risk Officer
Dennis Zarr, Executive Vice President

References

  1. CFTC files fraud lawsuit against AlphaMetrix. Reuters.
  2. Receiver sues AlphaMetrix brass for $19 million. Crain's Chicago Business.
  3. AlphaMetrix named to INC. 500 List. AlphaMetrix website.
  4. AlphaMetrix Expands Into Hedge Funds. HFMWeek.
  5. AlphaMetrix Introduces First-Ever Multi-Administrator Hedge Fund Platform. AlphaMetrix Website.
  6. Crain's Fast Fifty for 2011. Crains Chicago Business.
  7. Press Release. National Futures Association.
  8. Corporate History. Futures Industry Association.
  9. AlphaMetrix loses senior staffers; conference business in play. Futures Magazine.
  10. All Events. Context Summits.
  11. CME Group, futures regulator to part with struggling AlphaMetrix. Reuters.
  12. AlphaMetrix Ousts CFO in Cash Crunch After Touting Due Diligence. Bloomberg.
  13. Redemption requests push Alphametrix to liquidation. The Chicago Tribune.
  14. AlphaMetrix to Liquidate Fund Pools, Return Money to Investors. Bloomberg Businessweek.
  15. CFTC files fraud lawsuit against AlphaMetrix. Reuters.
  16. Receiver sues AlphaMetrix brass for $19 million. Crain's Chicago Business.
  17. AlphaMetrix settles with feds over misuse of client funds. Crain's Chicago Business.