ConvergEx Group will cough up $US43.8 million to settle criminal fraud charges brought by the Justice Department against one of the firm’s brokerages.
The SEC also charged three Converge Ex Group brokerage desks with civil fraud. They will pay $US107 million to settle the charges.
The brokerages are accused of lying to customers about commission rates.
Clients were made to believe ConvergeEx charged an explicit commission to execute trading orders for stocks.
In fact, the brokerages were allegedly routing orders through a Bermuda desk, which executed them for peanuts. This allowed the brokers to boost their profit margins: customers were unknowingly paying more than double what they thought they were paying to have their orders executed. Justice says the names for this alleged scheme at ConvergeEx were “spread,” “trading profits,” or “TP.” The Bermuda desk would often ask the clients’ brokers about the odds of the scheme getting detected before pocketing the extra money, according to the complaint.
“ConvergEx brokerages sent customer trades on an unnecessary journey through its offshore affiliate so they could take extra fees behind customers’ backs,” Stephen L. Cohen, associate director of the SEC’s Division of Enforcement, said in a statement.
The full SEC complaint can be found here »
We are waiting for the Justice Department’s complaint.
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