Hedge Fund Fraud Aug 13 2014 | 10:42am ET A Bahamian brokerage firm stands accused of helping a Bernard Madoff feeder fund manager hide losses from investors. The Securities and Exchange Commission has sued Alliance Investment Management and its president, Julian Brown, alleging that they assured Nikolai Battoo’s investors that Alliance served as custodian for Battoo’s hedge funds, when they in fact did not have custody of most of the assets. They also allegedly allowed him to create phony account statements on Alliance letterhead overstating assets by more than $150 million, and allowed Battoo to misappropriate $45 million in investor capital—$5 million of which allegedly went to Alliance and Brown. “We allege that Brown and his firm enabled Battoo’s scheme by providing investors with false assurances about who was holding their money and how much money they had in their accounts,” Timothy Warren of the SEC’s Chicago office said. The Alliance suit comes nearly two years after the SEC and Commodity Futures Trading Commission sued Battoo for hiding losses—including those suffered in the Madoff Ponzi scheme—from investors. The regulators said Battoo then used the collapse of MF Global Holdings as an excuse to stop paying out redemptions.