ConvergEx Group, a brokerage firm agreed to pay more than $151m to US regulators to settle criminal and civil charges that it exaggerated fees when trading for clients, deceived charities and other big investors.
As part of the settlement, ConvergEx, the parent company, paid $43.8m and signed a deferred prosecution agreement with the US Department of Justice (DoJ) to thwart criminal charges.
Furthermore, it also paid $107m to the US Securities and Exchange Commission (SEC) and admitted wrongdoing to settle related civil charges.
According to the US regulators, two former traders including Thomas Lekargeren and Jonathan Daspin at ConvergEx Group were engaged in sending trades through an overseas unit to add hidden markups and markdowns, subsequently pocketed millions of dollars in illegal charges, during 2006 through 2011.
ConvergEx Global Markets Limited (CGM Limited), a former broker-dealer registered in Bermuda, and ConvergEx Group have agreed to pay in total a criminal penalty of nearly $18m and forfeit approximately $12.8m, for a total penalty of $30.8m. Apart from this, both firms agreed to pay restitution of about $12.8m to defrauded customers.
In a parallel action, the U.S. Securities and Exchange Commission also reached a resolution today with three ConvergEx Group subsidiaries, Daspin and Lekargaren.
DoJ acting assistant attorney general Mythili Raman said that ConvergEx along with several of its employees, engaged in a concerted and coordinated effort to fleece its clients by charging them millions of dollars in unwarranted fees and then concealed those charges from its clients through a pattern of deception.
Assistant director in charge Parlave said, "With today’s guilty pleas, ConvergEx and two of its employees admitted their roles in a scheme in which they committed securities fraud."