SEC Charges Boston Trading and Research, LLC Principals with Fraud

December 3, 2010
By Parker Scheer LLP on December 3, 2010 8:37 AM |

Craig Karlis, 50 of Hopkinton, and Devrim Akyil, 38 of Hingham, have been accused of defrauding over 750 investors out of approximately $40 million. Together the two ran Boston Trading and Research, LLC (BTR). In November, 2010 the SEC filed a civil injunction in federal district court in Massachusetts to immediately stop the company from trading and defrauding investors. The main fraud concerned taking investor's money and pretending to invest in foreign currency ventures (referred to as "Forex"). Karlis and Akyil would promise investors high rates of return converting their dollars to foreign currency, taking advantage of beneficial exchange rates.

Among other things, the SEC alleges that the defendants misappropriated investor funds and lost a vast majority of the remaining funds through Forex trading even though they promised investors that most of their funds were protected against some losses. The SEC's complaint, filed under Securities and Exchange Commission v. Boston Trading and Research, LLC, Ahmet Devrim Akyil and Craig Karlis, uncovered that BTR solicited investments through their website (which has since been taken down) and sales representatives who introduced investors to Karlis and Akyil. The company actually attracted investors from around the world. BTR secured most of their investments by providing a stop-loss program where investors were promised that they would lose no more than an agree-upon percentage (typically 30%) on their initial investment. BTR also promised potential investors that its principals were paid from profits only, and not from any of the original investment money.

In fact, Karlis and Akyil allegedly diverted most of investor's money for their own benefit. BTR is a publicly traded company, and must file accountings and returns with the SEC annually to assure they follow regulations. To conceal the fraud, BTR sent investors and the SEC misleading account statements, while Karlis and Akyil were pocketing money and, in some cases, losing money on bad investments in Forex.

The losses were so bad that the company actually collapsed in 2008, and these losses fell well below the stop-loss agreements between BTR and investors. The SEC is seeking, in addition to fines and sanctions, a disgorgement of all ill-gotten gains including interest on the money. If convicted of the charges, the two face up to 20 years in prison, and a $250,000 fine for each wire fraud charge. In addition, Karlis faces up to an extra 3 years in prison, and a $100,000 fine for filing a false tax document since his name appears on the filed return for the company.

Turns out this is not the first time Craig Karlis has been involved in fraudulent schemes. Karlis used to run Tradex Swiss AG, a company that was banned from the National Futures Association (NFA) after it lost over $5 million of client money while being investigated for unlicensed practices. The NFA investigated companies and protects traders by alerting the public to scam and fraudulent investments.

The filed SEC complaint:

SEC Release

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