Owner of Foreign Exchange Currency Trading Company Executive Sentenced to Nine Years in Prison
BOSTON—A Hopkinton man, and former owner of Boston Trading and Research, was sentenced this afternoon to nine years in prison after pleading guilty to charges that he and his business partner defrauded more than 700 investors out of more than $30 million.
Craig K. Karlis, 54, was sentenced by U.S. Senior District Court Judge Mark L. Wolf to nine years in prison, three years of supervised release, and ordered to pay $4,378,306 in restitution to the fraud victims as well as $457,438 to the Internal Revenue Service. In March 2014, Karlis pleaded guilty to nine counts of wire fraud and two counts of tax-related crimes. Karlis’ business partner, Ahmet Devrim Akyil, was also charged, but remains a fugitive and is believed to be in his native Turkey.
“By any measure, Boston is one of this nation’s leading financial centers, with more than a trillion of dollars under management,” said United States Attorney Carmen M. Ortiz. “This prosecution—aimed at protecting this robust market—is reflective of the rapidly developing partnership among the United States Attorney’s Office, the U.S. Securities and Exchange Commission, and the Federal Bureau of Investigation. While the criminal enforcement of corporate and securities laws are not often headline news, they are at the heart of the United States Attorney’s Office growing white collar enforcement effort.”
In 2007, Karlis and Akyil founded Boston Trading and Research (BTR) and recruited customers to open accounts 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.
Among other things, Karlis and Akyil falsely told customers that BTR was compensated based on a percentage of trading profits and that, through BTR’s computerized customer trading platform and daily e-mailed account statements, customers saw every trade that was placed using customer money. Karlis and Akyil also falsely told customers that BTR had various different strategies to reduce risk, including most notably that, once BTR had lost 30 percent of the value of an individual customer’s account, the computerized platform automatically shut down all trading on that account and trading would not resume unless and until the customer gave BTR permission to continue trading.
From the outset of the business, Karlis and Akyil ignored these, and a number of other, representations. Karlis and Akyil did not limit what BTR took to only a percentage of the customers’ profit. Rather, Karlis and Akyil used millions of dollars from BTR customer accounts to pay BTR’s business expenses and to pay for their own personal expenses, such as houses, cars, and jewelry. Karlis and Akyil concealed this misappropriation from BTR’s customers on the computerized customer platform and account statements, which did not show all of the trades that BTR had placed using customer money. Finally, contrary to what Karlis and Akyil had told customers, the computerized platform did not have an automatic shut-down mechanism once BTR lost 30% of the value of customer accounts. In fact, over the course of BTR’s existence, Akyil ignored the 30% Astop-loss@limit several times and then, in August and September 2008, continued trading long after losing more than 30 percent, eventually losing approximately 90% of the customers’ money, or more than $30 million.
Karlis also filed a false tax document with the IRS in which he concealed the fact that he owned a second home that he had purchased with more than $600,000 in BTR customer money and then filed a false 2008 tax return in which he failed to report approximately $1.3 million in income he had received from BTR.
United States Attorney Carmen M. Ortiz; Vince B. Lisi, 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 in Boston, 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, Chief of Ortiz’s Economic Crimes Unit and Adam J. Bookbinder, Chief of her Cybercrime Unit.