CHICAGO (CN) - The CEO of commodity pool operator AlphaMetrix used customers' money as his "personal piggy bank," and held extravagant conferences in Monaco even as the firm plunged into insolvency and government investigation, a court-appointed receiver claims.
Deborah Thorne, court-appointed receiver for AlphaMetrix and AlphaMetrix Group, sued former AlphaMetrix officers Aleks Kins, Charley Penna, David Young, Geoff Marcus, and George Brown, in Federal Court.
AlphaMetrix was a Chicago-based commodity pool operator. AlphaMetrix Group (AMG), owned by AlphaMetrix, was a financial technology firm that provided transparency services to investors and hedge funds.
"As officers of both companies, the defendants owed AlphaMetrix and AMG the duties of loyalty and due care," the lawsuit states. "The defendants, however, breached those duties. Instead of exercising due care, the defendants pursued a reckless course of dealing which ultimately led to the insolvency of both entities and the subsequent appointment of a receiver for AlphaMetrix, AMG and their affiliates. Furthermore, in clear breach of their duty of loyalty, the defendants used AMG and/or allowed others to use AMG as their own personal piggy bank, taking out personal loans from AMG and having it pay personal expenses at the same time AMG was teetering on the brink of insolvency."
Despite the companies' falling revenue, the defendants spent more than $1.6 million on "lavish" summits in Chicago and Monaco that the company could not afford, the receiver claims.
AlphaMetrix spent more than $5.3 million on a new technology platform called the Marketplace, which was a complete failure, and loaned a total of $1.5 million to corporate officers for personal uses, including more than $1.1 million to the company's CEO, Aleks Kins, Thorne claims.
By early 2013, the company was unable to meet its financial obligations, according to the complaint.
"Although $22 million was swept up to AMG accounts from AlphaMetrix in 2013, Kins, Young, Penna and Brown caused AlphaMetrix to default on over $12 million of its obligations, instead using the monies to fund the 2013 loans made by AMG to officers, the cost overruns on the summits, the continuing expense of developing the Marketplace, and other of AMG's cash flow needs," according to the complaint.
To falsely improve the company's balance sheet, AMG allowed $3 million in unpaid rebates to show up on customers' account balances as reinvested in their account, Thorne claims.
Kins allegedly prepared and signed an amended promissory note that would not require him to make any payment on his debt to the company until 2023.
Meanwhile, AMG "held its most lavish summit yet - again in Monaco. As with the 2012 summit, no expense was spared for the two-day event. The resulting loss on the 2013 event was approximately $800,000."
The receiver, with Barnes & Thornburg, seeks damages for breach of fiduciary duty, and unjust enrichment. She also wants the loans repaid; in Kins' case, that would be $1,180,264, with interest.
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