OWNERS OF FOREIGN EXCHANGE CURRENCY TRADING COMPANY CHARGED WITH DEFRAUDING INVESTORS OUT OF MORE THAN $30 MILLION
BOSTON, Mass. - A Hopkinton man, who is the former owner of Boston Trading and Research (BTR) was arrested this morning on federal charges that he and his business partner, who also has been charged, defrauded more than 1,000 investors out of more than $30 million.
CRAIG A. KARLIS, 50, of Hopkinton, is charged with nine counts of wire fraud and two tax crimes. His business partner, AHMET DEVRIM AKYIL, 38, formerly of Hingham, was charged with 10 counts of wire fraud. The indictment charges that in 2007 Karlis and Akyil founded BTR and recruited customers to open accounts with BTR so that Akyil could trade the customers’ money in the foreign currency exchange (“FOREX”) market. By July 2008, BTR had approximately 1,200 customers and more than $35 million under management.
The indictment charges that Karlis and Akyil made a series of misrepresentations to customers about how BTR operated and about what they were doing with customer money. It is alleged that, while Karlis and Akyil told customers that BTR was compensated based on a percentage of the customers’ trading profits, Karlis and Akyil in fact used millions of dollars from BTR customer accounts to pay BTR’s business expenses and for their own personal expenses, such as houses, cars and jewelry. Karlis and Akyil allegedly concealed this misappropriation from customers on BTR’s computerized customer platform and account statements, which, contrary to Karlis’s and Akyil’s representations, did not show all of the trades that BTR had placed using customer money.
The indictment alleges that Karlis and Akyil told customers that BTR employed strategies to reduce risk, including a protection in the company’s computerized trading platform that automatically shut down all trading in a customer’s account if BTR’s trading lost a pre-set percentage (usually 30%) of the value in a particular account. It is alleged that, contrary to what Karlis and Akyil told customers, however, the computerized platform did not have an automatic shut-down mechanism. In fact, over the course of BTR’s existence, Akyil allegedly ignored 30% “draw-down” limits on several occasions. In August and September 2008, Akyil allegedly continued trading after he had lost more than 30% of the customer account funds. According to the indictment, this trading caused BTR to lose approximately 90% of the customers’ money, or more than $30 million.
According to the indictment, Karlis also filed a false tax document with the Internal Revenue Service in which he concealed the fact that he owned a second home which he had purchased with more than $600,000 from a BTR customer account. It is further alleged that Karlis also failed to file a 2008 tax return and thus failed to report approximately $1.3 million in income he had received from BTR during that year.
U.S. Attorney Ortiz said “The Department of Justice, along with our law enforcement and civil regulatory partners, is committed to protecting investors. During these challenging financial times, we cannot, and will not, allow financial predators to mislead and take advantage of hard-working Americans.”
Karlis will appear in federal court in Boston before U.S. Magistrate Judge Leo T. Sorokin at 3:00 p.m. today. Akyil, who left the United States for Turkey in 2009, is still at large.
The Securities and Exchange Commission, which conducted a separate civil investigation and cooperated with criminal authorities, filed a lawsuit today alleging that Karlis and Akyil defrauded investors out of millions of dollars.
If convicted on these charges, Karlis and Akyil both face up to 20 years imprisonment, to be followed by three years of supervised release and a $250,000 fine on each of the wire fraud charges. Karlis also faces up to three years imprisonment, to be followed by one year of supervised release and a $100,000 fine on the charge of filing a false tax document, and one year imprisonment to be followed by one year of supervised release and a fine for failing to file his 2008 tax return.
United States Attorney Carmen M. Ortiz; Richard DesLauriers, Special Agent in Charge of the Federal Bureau of Investigation – Boston Field Division; and William P. Offord, Special Agent in Charge of the Internal Revenue Service’s Criminal Investigation – Boston Field Office made the announcement today. The SEC and the Commodity Futures Trading Commission also cooperated with the investigation. The case is being prosecuted by Assistant U.S. Attorneys Sarah E. Walters of Ortiz’s Economic Crimes Unit and Adam J. Bookbinder of her Computer Crime Unit.
The details contained in the indictment are allegations. The defendants are presumed to be innocent unless and until proven guilty beyond a reasonable doubt in a court of law.