TRENTON — An online brokerage firm accused of being a part of defrauding investors in a scam that lost about $4.5 million in trading within a two-month period has agreed to a settlement with New Jersey's Division of Consumer Affairs and the Bureau of Securities.
According to New Jersey Attorney General Gurbir Grewal's office, the bureau reached the settlement with Interactive Brokers LLC to resolve charges it allowed three-time convicted felon Peter Zuck to use their online trading platform to defraud investors who invested in Zuck's Osiris Fund Limited Partnership.
Zuck, who pleaded guilty to conspiracy to commit wire fraud and tax evasion in 2017 and was sentenced to three years in prison, exposed investors to "extraordinary market risk," the Attorney General's Office said. He also sent fake investor account statements that falsely listed the hedge funds net asset value to hide losses, according to Grewal's office. Zuck settled with the bureau in 2014 with a judgment of more than $7.5 million.
“Interactive Brokers allowed a three-time convicted felon, who had been barred by the NFA, to open accounts and trade other people’s money on its platform where he recklessly traded millions of dollars,” New Jersey Bureau of Securities chief Christopher Gerold said in a statement. “As this action evidences, online broker-dealers have a duty to supervise their platforms and when they don’t, they will be held accountable for their actions and inaction.”
As part of the settlement, Interactive will pay a $100,000 civil penalty, revise its client account opening policies and agrees to comply with securities law, according to Grewal's office.