The Securities and Exchange Commission on Thursday obtained a freeze on the assets of  an investment manager who allegedly boasted of his success during the 2008 financial crisis but who actuality was a major money-loser in the Bernard Madoff Ponzi scheme.

The SEC alleges that Nikolai S. Battoo, who claimed to manage $1.5 billion on behalf of investors around the world-including at least $100 million for U.S.-based investors-actually suffered major losses due to Madoff's pyramid scheme and a failed derivative investment program.

Rather than disclose those losses to investors, Battoo, 41, who according to court papers has maintained a residence in Florida since 2009, overstated the value of his investments and, by boasting benchmark-beating returns, has continued to attract new investors. However, in last few months the SEC claims that investors demanded Batto provide redemptions on their investments. Instead of paying them, Battoo offered a series of excuses ranging from the MF Global collapse to others placing a hold on investors' money due to government investigations.

In U.S. District Court for the Northern District of Illinois, the SEC said, the commission obtained a freeze of U.S.-based assets belonging to Battoo and two of his companies-BC Capital Group S.A. based in Panama and BC Capital Group Limited based in Hong Kong-in order to prevent additional harm to U.S. investors.

In addition to Battoo and his companies, the SEC has charged Tracy Lee Sunderlage-an unregistered broker-dealer who was banned from the industry in a previous SEC enforcement action-for his involvement with Battoo's investment program.

The SEC's complaint alleges that Battoo pitched himself as a highly successful alternative asset manager with a track record unblemished by the global financial crisis of 2008. He also hyped his purported success at a "due diligence conference" that he and Sunderlage sponsored for existing and prospective investors at the Four Seasons Hotel in Las Vegas in January 2009.

According to the SEC, Battoo's promotional material provided at the conference boasted, "How is it that PIWM-I can produce positive results or significantly reduce market losses when nearly everyone else is losing 35 to 50%?"

In 2008, Battoo was fired as an investment advisor to the master fund of a large international bank, which terminated him from a "fund linked certificate" program through which Battoo-managed hedge funds with about $138 million in assets. After Battoo's termination, the net asset value of the hedge fund managed for the bank plummeted by nearly 50 percent, and Battoo's losses on the fund-linked certificates exceeded $100 million. Other major losses suffered by Battoo's asset management business later that year flowed from Bernie Madoff's Ponzi scheme, in which several Battoo-managed hedge funds were heavily invested.

Following Madoff's arrest, Battoo assured his investors that Madoff's fraud had only a nominal or minimal impact on the portfolios. However, several Battoo-managed portfolios held substantial investments in hedge funds that fed into the Madoff scheme, according to the SEC. In fact, Battoo had borrowed money to increase the size of his Madoff investments. Battoo similarly concealed from investors the losses stemming from the fund-linked certificates, according to the SEC. Without knowledge of these substantial losses, investors have collectively invested tens of millions of dollars with Battoo since 2009.

More recently, Battoo told investors that certain counterparties had frozen the assets he manages based on investigations by U.S. government agencies, and that his attorneys were negotiating a "release" with the SEC. Prior to filing this complaint, Battoo's assets were not frozen and he was not negotiating any release with the SEC, according to the SEC.

The SEC alleges that Sunderlage-who was banned by the SEC in 1986 for fraud-received commissions from the sale of investments and also received management fees for acting as the designated investment advisor to numerous client trusts that invested with Battoo. The SEC charges that Sunderlage thus acted as an unregistered broker-dealer and investment advisor in violation of his industry bar.

The SEC investigation is ongoing officials said.

-Jim McConville