The Securities and Exchange Commission recently charged four brokers with illegally overcharging customers $18.7 million by using hidden markups and markdowns and secretly keeping portions of profitable customer trades.
The SEC alleges that the brokers purported to charge customers very low commission fees that were typically pennies or fractions of pennies per transaction, but in reality they were reporting false prices when executing the orders to purchase and sell securities on behalf of their customers. The brokers made their scheme especially difficult to detect because they deceptively charged the markups and markdowns during times of market volatility in order to conceal the fraudulent nature of the prices they were reporting to their customers. The surreptitiously embedded markups and markdowns ranged from a few dollars to $228,000 and involved more than 36,000 transactions during a four-year period. Some fees were altered by more than 1000 percent of what was being told to customers.
The SEC further alleges that when a customer placed a limit order seeking to purchase shares at a specified maximum price, the brokers filled the order at the customer’s limit price but used opportune times to sell a portion of that order back to the market to obtain a secret profit for the firm. They falsely reported back to the customer that they could not fill the order at the limit price. Meanwhile, the brokers made millions of dollars in illicit performance bonuses based on the fraudulent earnings they were generating on the cash desk.
The brokers charged in the SEC’s complaint are Marek Leszczynski, Benjamin Chouchane, Gregory Reyftmann, and Henry Condron.
In a parallel action, the U.S. Attorney’s Office for the Southern District of New York today announced criminal charges against Leszczynski and Chouchane. Condron has pled guilty to criminal charges.
The SEC’s complaint alleges that the scheme spanned from 2005 to 2009 and that the brokers’ scheme enriched not only the firm but themselves as well. The four brokers received substantial performance bonuses totaling more than $15.6 million based, in part, on the fraudulent earnings generated by the cash desk.
The White Law Group is investigating the liability that the four individuals’ broker-dealer would have for their actions. Not only does it appear that the firm was enriched as a result of their actions, but the firm would be vicariously liable for the illegal activities of the firm.
According to their FINRA broker reports, Marek Leszczynski, Benjamin Chouchane, Gregory Reyftmann, and Henry Condron were each employed by Linkbrokers Derivatives, LLC at or about the same time.
If you believe that you have been the victim of this illegal trading scheme, please call the securities attorneys of The White Law Group at 312/238-9650 for a free consultation.
The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Boca Raton, Florida.
For more information on The White Law Group, please visit our website at http://www.whitesecuritieslaw.com.