One day after the Securities Exchange Commission announced it was freezing his company’s operations, a North Aurora businessman denied that he has ever swindled anyone.

Belal Faruki said a report released Wednesday by the SEC is based on the complaint of one his partners who was upset that the private investment firm lost money. This partner “cried wolf” to the SEC, Faruki said.

“It’s false,” he said. “It’s absolutely false.”

The SEC complaint alleges that Neural Markets ran an elaborate scheme that defrauded at least one investor of $1 million. The complaint also alleges that Neural Markets lied by portraying itself as a hedge fund that had a positive investment performance since 2009 and that other wealthy investors had put $5 million into the business. According to the complaint, Faruki misled the investor about the time period and amount of losses.

On Thursday, Faruki said the entire complaint is a smear campaign by one former partner.

“It’s working. He definitely ruined our lives,” he said. “And the government is his free lawyer right now.”

Faruki said he is a mathematician who designed software that could provide good investment strategies. As principal owner of Neural Markets, he and five friends decided to use the software to invest in the market. It was a private company that did not want outside investors, Faruki said.

“We don’t take public money. We don’t advertise ourselves to the public. We’re not interested in that,” he said. “We don’t want to be a hedge fund.”

The fund did lose money in October and November of 2010, Faruki said. Faruki said the investor who filed the complaint lost about $220,000, and demanded the others cover his losses – a request the other balked at.

“That’s not how this works,” he said. “The agreement he signed is that we’re partners and we all share equally in the gains and losses.”

Faruki said the reason no other victims are mentioned in the SEC complaint is that there aren’t any. According to Faruki, it is simply one disgruntled partner who could not get a criminal complaint filed so he turned to the SEC.

“The SEC is allowing taxpayers’ dollars to be blown on a frivolous lawsuit,” Faruki said.

Faruki identified the partner complainant, but The Beacon-News is not printing his name because he could not be reached for comment and is a potential victim. Faruki said he plans fight the civil complaint and the company is planning to sue the investor.

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