WASHINGTON (Legal Newsline) - The Securities and Exchange Commission filed a complaint on Friday against four brokers who allegedly illegally overcharged customers $18.7 million while working on the cash desk of a New York-based broker-dealer.
Henry Condron, Gregory Reyftmann, Benjamin Chouchane and Marek Leszczynski allegedly used hidden markdowns and markups on securities trades and secretly kept portions of profitable customer trades.
The brokers allegedly claimed they were charging customers very low commission fees but were actually reporting false prices when executing the orders to sell and purchase securities on their customers' behalf.
"These brokers stole millions of dollars by overcharging customers for trades involving stocks with high trading volumes and price volatility, which are characteristics they wrongly thought would conceal their illicit pricing scheme," said Robert Khuzami, the director of the SEC's Division of Enforcement. "They underestimated the SEC's ability and resolve to pursue such illegal schemes."
Between 2005 and 2009, the four brokers allegedly embedded markups and markdowns for securities transactions between a few dollars and $228,000 on more than 36,000 transactions over a four-year period.
The defendants also allegedly used opportune times to sell portions of their customers' shares back to the market to obtain a secret profit for the firm, earning the brokers millions of dollars in illicit performance bonuses.
The four brokers allegedly received performance bonuses of more than $15.6 million. The bonuses were partly based on the allegedly fraudulent earnings generated by the cash desk.
In a parallel action, the U.S. Attorney's Office for the Southern District of New York announced criminal charges on Friday against Chouchane and Leszczynski. Condron pled guilty to criminal charges.