Comp pr2010-205

Case 1:10-cv-11841 Document 1 Filed 10/28/10 Page 1 of 16
UNITED STATES DISTRICT COURT

DISTRICT OF MASSACHUSETTS

SECURITIES AND EXCHANGE COMMISSION
Plaintiff,
v. Civil Action No.
BOSTON TRADING AND RESEARCH, LLC,
AHMET DEVRIM AKYIL, and JURY TRIAL
CRAIG KARLIS DEMANDED
Defendants
COMPLAINT
PlaintiffSecurities and Exchange Commission (the "Commission") alleges the following
against defendants, Boston Trading and Research, LLC ("BTR"), Ahmet Devrim Akyil
("Akyil"), and Craig Karlis ("Karlis"), and hereby demands a jury trial.
PRELIMINARY STATEMENT
I. Defendant BTR, which was founded by Akyil and Karlis in or around January
2007 and registered as a limited liability company in Massachusetts in or around August 2007,
offered investors the opportunity to invest money for purposes oftrading in foreign currency
("FOREX"). For a minimum investment of$1 0,000, investors could deposit money with the
BTR program; the investors provided Akyil with a limited power ofattorney that granted him the
right to direct the trading oftheir funds in the FOREX market. From at least July 2007 to
September 2008, Akyil and Karlis, either directly or indirectly through BTR, raised

Case 1:10-cv-11841 . Document 1 Filed 10/28/10 Page 2 of 16
approximately $40 million from approximately 750 investors in the purported foreign currency
trading venture.
2. BTR's representations to investors,made in writing and/or orally, included the
following:· investors could track the use oftheir funds through daily and montWy account
statements and would have access to a real-time trading platform showing trades as they
happened; BTR's trading system was set up with a stop-loss program, so investors could lose no
more than an agreed-upon percentage oftheir initial investment; and BTR's earnings would
come from profits generated by trading. In addition, BTR's investors signed draw-down forms
which purported to cap losses at a specified percentage, typically 30%. None ofthese
representations were true.
3. The defendants diverted investor money for their own personal purposes,
including funding BTR's operations, personal expenses, and expenses for other companies with
which they were associated. BTR, through Akyil and with Karlis's knowledge or reckless
disregard, traded investor money without full disclosure to investors, and in ways inconsistent
with their representations to investors. In or around September 2008, Akyillost significant
investor assets, far beyond what was authorized by the draw-down forms. Even when futures
commission merchants doing business with BTR requested additional funds to meet losses,
Akyil used additional investor funds for trading. As a result, BTR collapsed in September 2008
due to significant trading losses. The remaining. funds were distributed to investors.
4. Through the activities alleged in this complaint, the defendants engaged in: (l)
fraud in the offer or sale ofsecurities, in violation ofSection 17(a) ofthe Securities Act of 1933
("Securities Act"); (2) fraudulent or deceptive conduct in connection with the purchase or sale of
securities, in violation of Section 1o(b) ofthe Exchange Act of 1934 ("Exchange Act") and Rule
2

IOb-5 thereunder; (3) the sale of securities without being registered as brokers or dealers, in
violation of Section I5(a) ofthe Exchange Act; and (4) the offer and sale ofunregistered
securities, in violation of Sections 5(a) and (c) ofthe Securities Act.
5. Accordingly, the Commission seeks: (i) entry of a pennanent injunction
prohibiting the defendants from further violations ofthe relevant provisions ofthe federal
securities laws; (ii) disgorgement ofAkyil's and Karlis's ill-gotten gains, plus pre-judgment
interest; (iii) the imposition ofa civil monetary penalty against Akyil and Karlis; and (iv) such
other equitable reliefas the Court deems just and proper.
JURISDICTION
6. The court has jurisdiction over this action pursuant to Sections 20(d) and 22(a)
ofthe Securities Act [IS U.S.C. §§ 77t(d), 77v(a)] and Sections 21(d), 21(e) and 27 ofthe
.Exchange Act [IS U.S.C. §§78u(d), 78u(e), 78aa]. Venue is proper in this District because the
Company was headquartered in Massachusetts and Karlis lives in Massachusetts. Akyil, who
now resides outside ofthe United States, lived in Massachusetts during the relevant period.
7. The Commission seeks a pennanent injunction and disgorgement pursuant to
Section 20(b) ofthe Securities Act [15 U.S.C. §77t(b)] and Section 21(d)(l) ofthe Exchange Act
[15 U.S.C. §78u(d)(I)]. The Commission seeks the imposition of a civil monetary penalty
pursuant to Section 20(d) ofthe Securities Act [IS U.S.C. §77t(d)] and Section 2I(d)(3) ofthe
Exchange Act [IS U.S.C. §78u(d)(3)].
8. .In connection with the conduct alleged, the Defendants, either directly or
indirectly, made use ofthe means or instrumentalities of interstate commerce, ofthe mails, the
facilities ofnational securities exchanges, and/or ofthe means or instruments oftransportation or
communication in interstate commerce.
3

9. The defendants' conduct involved fraud, deceit, or deliberate or reckless
disregard ofregulatory requirements, and resulted in substantial loss, or significant risk of
substantial loss, to other persons.
DEFENDANTS
10. On information and belief, Akyil, age 38, currently resides in Turkey. During
the relevant period, Akyil resided in Hingham, Massachusetts. During the time in question,
Akyil was BTR's president, head trader, and one of its three owners.
11. Karlis, age 50, is a resident ofHopkinton, Massachusetts. During the time in
question, Karlis was BTR's managing director and one of its three owners until his ownership
interest was purchased by Akyil in or around August 2008.
12. BTR was a Massachusetts-based limited liability company organized under the
laws ofDelaware in January 2007. BTR's corporate filing, available on the Massachusetts
Secretary of State's website, reflects that BTR was registered in Massachusetts as a limited
liability company on August 24,2007. BTR operated outof 100 Franklin Street, Boston,
Massachusetts 02110. During at least part ofthe relevant period, BTR partnered with formerly
registered broker-dealer Maximum Financial Investment Group, Inc. ("MFIG").
4

STATEMENT OF FACTS
A. BACKGROUND
13. BTR offered investors the opportunity to invest money to be managed by Akyil
for purposes oftrading in foreign currency. BTR required a minimum investment of$10,000;
with that, prospective investors could join BTR's trading program by signing a limited power of
attorney that granted Akyil the right to trade their funds in the FOREX market.
14. Investors deposited money with BTR with an expectation that profits would be
produced by the efforts ofBTR and, in particular, Akyil. Investors purportedly shared in the
profits and losses associated with trades placed on their behalf.
15. BTR's investors were both domestic and foreign, with many residing in Florida.
Akyil and Karlis either directly or indirectly solicited investors through marketing materials,
presentations, BTR's website, and salespeople. Salespeople received compensation, including a
percentage ofprofits and rebates from per-trade commissions, for providing these services to
BTR. The defendants, through these salespeople, marketing materials, and presentations,
marketed BTR as an opportunity for investors to increase earnings on retirement funds.
16. Investor funds were pooled in one ofa few bank accounts held in BTR's name.
BTR did not open bank accounts in the name ofinvestors or otherwise segregate individual
investors' funds. Investor funds were also pooled for purposes oftrading in foreign currency.
17. According to BTR's policy, investors could only withdraw funds at the end of
each month.
18. At least some investors understood that their funds would be pooled with others'
for purposes oftrading. Moreover, BTR was advertised as a trading program in which the
success depended on Akyil's trading strategy.
5

19. In the FOREX market, every buyer ofa currency is paired with a seller that is
willing to sell, and vice versa. The party that is paired with the buyer (or seller) is called a
counterparty. Akyil directed trades on behalfofgroups ofinvestors with BTR serving as the
counterparty. Akyil purportedly caused the trades to be recorded on an electronic trading
platform maintained by BTR that generated daily investor account statements.
20. BTR's platform reflected the contractual obligations between BTR and
investors. BTR opened accounts at various futures commission merchants ("FCMs") in its own
name with pooled investor funds for purposes of placing FOREX trades. An FCM served as a
counterparty to the BTR trades Akyil made with investor funds.
21. The FCMs extended margin, or the ability for BTR to place leveraged trades,
provided that BTR met certain margin requirements as determined by the FCMs. A requirement
was that BTR's accounts be sufficiently funded. The investor funds pooled by BTR on deposit
at FCMs allowed BTR to meet the FCMs' margin requirements. A "margin call" is a request by
an FCM to deposit additional funds to meet margin requirements.
22. Akyil's trading ofmultiple investors' funds together purportedly benefited the
investors. For example, a BTR representative sent a July 11,2008 email to investors explaining
a purported benefit ofmaking fewer, block trades: "increasing trading frequency increases risk
exposure as no trader can be correct 100% ofthe time. In order to preserve the integrity of
[Akyil's] risk management parameters ... BTR began developing ... software ... which gives
our trader the ability to trade as many accounts as needed in a much quicker and more efficient
manner."
23. BTR misled investors as to the trades being made with their money. The trades
shown on BTR's trading platform, which investors could see electronically, did not necessarily
6

match the trades placed by BTR with FCMs. The FCM trades were made with investor funds
and not fully disclosed to investors.
B. MISAPPROPRIATION
24. In at least one offering docwnent, BTR represented to investors that "We do
Dot profit unless you do." (Emphasis in original). Despite such representations to investors,
BTR, with Akyil and Karlis as owners, misappropriated investor funds nearly from BTR's
operational inception.
25. For example, Akyil, who had signatory authority over two bank accounts
holding BTR investor funds, and Karlis, who had signatory authority over a third bank account
holding BTR investor funds, transferred money, caused investor money to be transferred, or
knew or were reckless in not knowing that investor money was transferred and used for BTR's
operations. They also transferred money, caused investor money to be transferred, or knew or
were reckless in not knowing that investor money was transferred to their own accounts and used
for personal expenses. Investor funds were also transferred to other entities with which Akyil
and Karlis were associated. Further, Akyil and Karlis used investors' funds for entertainment
and other purchases, including cars and a Florida home. Akyil and Karlis knew, or were reckless
in not knowing, that investor funds were being used for BTR's and their own personalbenefit,
and that investors were not aware ofthis.
26. In particular, Akyil and Karlis knew or were reckless in not knowing that BTR
had insufficient cash to cover moneys owed to investors as reflected in their account statements
and that this shortfall amounted, at various times, to millions of dollars.
7

27. In or around May 2008, a dispute arose among BTR's owners concerning
Karlis's use of funds for personal spending. Karlis's ownership interest in BTR was eventually
bought out on or about August 8, 2008.
28. By using investor money for anything other than trading in foreign currency, the
defendants used investor funds in ways the investors did not know about and had not authorized.
29. To redeem one investor in whole, BTR would either need to take money from
another investor or eliminate the deficit between BTR's liabilities and cash on hand by profiting
through the trading ofpooled investor funds.
C. MISLEADING ACCOUNT STATEMENTS
30. BTR represented to investors that their account statements generated by BTR's
electronic trading platform would reflect the trading activity and balance of their investment.
This representation was false.
31. BTR, through Akyil, and with Karlis's knowledge, misled investors by trading
funds differently from what was disclosed in daily account statements.
32. BTR also traded in commodities, such as oil, without disclosure to investors.
This trading was done with investor money.
33. The balance and equity positions BTR showed investors on their account
statements did not reveal to investors that their funds had been diminished through BTR's use of
those funds for undisclosed purposes.
34. In or around September 2008, Akyil traded significantly more investor funds
through BTR's accounts held at FCMs than what was disclosed to investors. By failing to record
the same trades on BTR's electronic trading platform, Akyil knowingly concealed this trading
activity in or around September 2008 from investors.
8

35. On September 4,2008, a BTR representative emailed investors and said: "Over
the past few days [BTR] experienced trading losses that were more than what the Company can
tolerate.... Customer accounts are being reconciled now." These losses were not reflected
contemporaneously on investors' account statements, as they should have been pursuant to
BTR's representations.
D. BREACH OF DRAW-DOWN AGREEMENTS
36. Investors, who granted Akyillimited power ofattorney to access and trade their
funds, signed a draw-down agreement in which they specified the maximum amount of loss they
were willing to incur (usually as a percentage of investment) before trading was to cease in their
accounts.
37. The language in the draw-down forms changed over time, but provided for
liquidation ofpositions once the investment diminished by a certain percentage.
38. Further, and notwithstanding disclaimers in the draw-down provisions, investors
were orally assured by Akyil, either directly or indirectly, and by other BTR representatives that
BTR's system would cap losses at a certain percentage.
39. Akyil did not honor the representations BTR made in draw-down forms or oral
representations about stopping losses.
40. Karlis acknowledged that he was aware ofat least one instance when Akyil
traded through the draw-down limits.
41. In September 2008, Akyil continued trading instead of attempting to liquidate
positions despite suffering significant losses with investor funds which resulted in margin calls
from FCMs. In fact, Akyil deposited, cause~ to be deposited, or knew or was reckless in not
9

knowing that additional BTR investor funds were deposited with FCMs in order to continue
trading. BTR collapsed in September 2008 due to significant trading losses.
42. BTR maintained a trading account in its own name at Saxo Bank. On or about
August 28, 2008, after depositing an additional $1,000,000 from an investor-funded BTR bank
account over which Akyil maintained signature authority, BTR's balance (comprised ofpooled
investor funds) at Saxo Bank was approximately $6 million. However, by September 2, 2008,
the account's value declined to approximately $3.7 million. Akyil did not liquidate, or attempt to
liquidate, these losing trades.
43. On the same day, Saxo Bank sent an email to BTR, on which Akyil was
included, which said "[y]our margin requirement is USD $1,302,448, while your available
margin is USD $1,007,590. Please immediately reduce your positions accordingly and/or
transfer sufficient funds to support your open positions."
44. Instead ofliquidating positions, on or about September 3, 2008, another
$500,000 was transferred to Saxo Bank from an investor-funded BTR bank account over which
Akyil maintained signature authority. After this transfer, BTR resumed trading. By September 4,
2008, BTR's balance at Saxo Bank dropped from approximately $4.2 million to approximately
$800,000, resulting in significant investor losses.
45. BTR suffered similar losses in the three trading accounts held in its own name
at an FCM called Forex Capital Markets ("FXCM"). Approximately $1,000,000 was transferred
on or about August 29,2008, to one FXCM account from an investor-funded BTR bank account
over which Akyil maintained signature authority. Following the August 29, 2008 transfer,
BTR's balance in this FXCM account, which consisted ofpooled investor funds, was
10

approximately $4 million. Heavy losses in the account triggered margin calls. By September 2,
2008, the balance dropped to approximately $463,000.
46. Akyil, in knowing or reckless disregard of investor draw-down agreements,
chose to continue trading with investor funds, despite knowing that investors were experiencing
heavy losses. For example, a September 1,2008 message from Akyil to a FXCM representative
said: "[1] just got a margin call in 3 ofmy accounts can u [sic] refresh them so I can keep on
trading."
47. Moreover, approximately $500,000 more was wired from an investor-funded
BTR bank account over which Akyil maintained signature authority to the FXCM account on or
about September 2, 2008, and an additional deposit was made of approximately the same amount
on or about September 3,2008, and BTR resumed trading. Despite the additional deposits, the
account's balance dipped to approximately $182,000 as a result oflosses and transfers to other
FXCM accounts.
48. In a second FXCM account, BTR's balance, which was comprised ofpooled
investor funds, was approximately $1.9 million at the start of September 1,2008. However, by
September 3, 2008, the account's value haddec1ined to approximately $31,000. Nonetheless,
BTR, through Akyil or jth Akyil's knowledge, transferred approximately $150,000 from
another FXCM account on or about September 3, 2008, and continued trading. The account's
value declined on continued trading to approximately $120,000 by September 4,2008.
49. In a third FXCM account, BTR's balance, which was comprised ofpooled
investor funds, was approximately $3.5 million on September 1, 2008. The balance in this
account dropped to approximately $68,000 by September 3, 2008, and at or about that time, BTR,
through Akyil or with Akyil's knowledge, transferred approximately $250,000 from another of
11

its FXCM accounts. Following the transfer, Akyil resumed trading and the balance declined to
approximately $100,000 by September 4,2008.
50. In addition, an account in BTR's name comprised ofinvestor funds held at FC
Stone, another FCM, incurred millions in losses in early September 2008. Despite losses,
additional funds were transferred to FC Stone from an investor-funded BTR bank account over
which Akyil maintained signature authority. Notwithstanding draw-down agreements, Akyil
continued trading in this account, using investor funds.
51. Akyil knew or was reckless in not knowing that he, either directly or indirectly
through BTR, defrauded investors by continuing to deposit additional funds and. trade, resulting
in significant losses of investor funds, despite representations contained in draw-down
agreements that investor losses would be limited, or at least BTR would attempt limit losses, to a
certain percentage oftheir investment.
FIRST CLAIM FOR RELIEF

(All Defendants)

(Violation of Section 17(a) ofthe Securities Act)

52. The Commission repeats and incorporates by reference the allegations in
paragraphs 1 - 51 above as set forth fully herein.
53. The defendants, either directly or indirectly, acting intentionally, knowingly or
recklessly, in the offer or sale ofsecurities by the use ofthe means or instruments of
transportation or communication in interstate commerce or by the use ofthe mails: (a) have
employed or are employing devices, schemes or artifices to defraud; (b) have obtained or are
obtaining money or property by means ofuntrue statements ofmaterial fact or omissions to state
a material fact necessary in order to make the statements made, in the light ofthe circumstances
under which they were made, not misleading; or (c) have engaged or are engaging in transactions,
12

practices or courses ofbusiness which operate as a fraud or deceit upon purchasers ofthe
securities.
54. As a result, the defendants have violated and, unless enjoined, will continue to
violate Section 17(a) ofthe Securities Act [15 U.S.C. § 77q(a)].
SECOND CLAIM FOR RELIEF

(All Defendants)

(Violation of Section 1O(b) of the Exchange Act and Rule 10b-5 tbereunder)

56. The Defendants, either directly or indirectly, acting intentionally, knowingly or
recklessly, by the use ofmeans or instrumentalities of interstate commerce or ofthe mails, in
connection with the purchase or sale of securities: (a) have employed or are employing devices,
schemes or artifices to defraud; (b) have made or are making untrue statements ofmaterial fact
or have omitted or are omitting to state a material fact necessary to make the statements made, in
the light ofthe circumstances under which they were made, not misleading; or (c) have engaged
or are engaging in acts, practices or courses ofbusiness which operate as a fraud or deceit upon
certain persons.
violate Section 10(b) ofthe Exchange Act [15 U.S.C. § 78j(b)] and Rule 1Ob-5 thereunder [17
C.F.R. § 240.10b-5].
THIRD CLAIM FOR RELIEF

(All Defendants)

(Violations ofSection5(a) and 5(c)of the Securities Act)

13

Case 1:10-cv-11841 Document 1 Filed 10/28/10 . Page 14 of 16
59. The products issued by the defendants are "securities" within the meaning of
Section 2(1) ofthe Securities Act [15 U.S.C. §77b(a)(I)] and Section 3(a)(l0) ofthe Exchange
Act [15 U.S.C: §78c(a)(10)]. No registration statement was filed with respect to these securities,
and no exemption from registration was available.
60. The defendants, either directly or indirectly: (a) have made use ofthe means or
instruments oftransportation or communication in interstate commerce or ofthe mails to sell,
through the use or medium ofa prospectus or otherwise, securities as to which no registration
statement has been in effect and for which no exemption from registration has been available;
and/or (b) have made use ofthe means or instruments oftransportation or communication in
interstate commerce or ofthe mails to offer to sell, through the use or medium ofa prospectus or
otherwise, securities as to which no registration statement has been filed and for which no
exemption from registration has been available.
violate Sections 5(a) and (c) ofthe Securities Act [15 U.S.C. §§77e(a), (c)].
FOURTH CLAIM FOR RELIEF

(Akyil and Karlis)

(ViolationS of Section 15(a)(1»

63. Defendants Akyil and Karlis, by engaging in the conduct described above,
either directly or indirectly, made use ofthe mails or means or instrumentalities ofinterstate
commerce to effect transactions in, or to induce or attempt toinduce the purchase or sale of,
securities, without being registered as a broker or dealer in accordance with Section 15(b) ofthe
Exchange Act [15 U.S.C. §78o(b)].
14

64. As a result, defendants Akyil and Karlis violated and, unless enjoined, will
continue to violate Section 15(a)(1) ofthe Exchange Act [15 U.S.C. §780(a)(1)].
PRAYER FOR RELIEF
WHEREFORE, the Commission requests that this Court:
A. Enter a permanent injunction restraining the defendants and each oftheir agents,
servants, employees and attorneys and those persons in active concert or participation with them
who receive actual notice ofthe injunction by personal service or otherwise, including facsimile
transmission or overnight delivery service, from directly or indirectly engaging in the conduct
described above, or in conduct of similar purport and effect, in violation of:
1. Sections 5(a) an~ (c) of the Securities Act [15 U.S.C. §§77e(a), (c)];
2. Section 17(a) ofthe Securities Act [15 U.S.C. §77q(a)];
3. Section IO(b) ofthe Exchange Act [15 U.S.C. §78j(b)] and Rule 10b-5
thereunder [17 C.F.R. §240.10b-5];
B. Enter a permanent injunction restraining Akyil and Karlis and each of their agents,
servants, employees and attorneys and those persons in active concert or participation with them
who receive actual notice of the injunction by personal service or otherwise, including facsimile
transmission or overnight delivery service, from directly or indirectly engaging in the conduct
described above, or in conduct of similar purport and effect, in violation of:
1. Section 15(a)(I) ofthe Exchange Act [15 U.S.C. §780(a)(I)].
C. Require the defendants to disgorge their ill-gotten gains and losses avoided, plus
pre-judgment interest, with said monies to be distributed in accordance with a plan of
distribution to be ordered by the Court;
15

Case 1:10-cv-11841 Document 1 Filed 10/28/10 Page 16 of 16 .
D. Order the defendants to pay an appropriate civil monetary penalty pursuant to
Section 20(d) ofthe Securities Act [15 U.S.C. §77t(d)] and Section 21(d)(3) ofthe Exchange Act
[15 U.S.C. §78u(d)(3)];
E. Retain jurisdiction over this action to implement and carry out the tenns of all
orders and decrees that may be entered; and
F. Award such other and further relief as the Court deems just and proper.
JURy DEMAND

The Commission hereby demands a trial by jury on all claims so triable.

Rachel E. Hershfang .# 631898)
Senior Trial C unsel
Martin Healey (BBO 7550)
Regional Trial Counsel
Michael Foster (Illinois Bar# 6257063)
Senior Trial Counsel
Eric A. Forni (BBO# 669685)
Senior Enforcement Counsel
Kevin B. Currid (BBO# 644413)
Senior Enforcement Counsel
Attorneys for Plaintiff, SECURITIES
AND EXCHANGE COMMISSION
33 Arch Street, 23rd
Floor
Boston, MA 02110
(617) 573-8987 (Hershfang direct)
(617) 573-4590 (fax)
hershfangr(@,sec.gov (Hershfang email)
Dated: October 28,2010
16

Comp pr2010-205

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