ConvergEx Group Subsidiary To Pay $26 Million
A brokerage subsidiary of ConvergEx Group LLC was sentenced and ordered to pay a criminal penalty and restitution of $26 million for wire fraud and conspiracy to commit securities and wire fraud in connection with a scheme to charge clients millions of dollars in unwarranted and hidden fees, a statement from the FBI said.
“CGM Limited, a subsidiary of the global brokerage and trading firm ConvergEx, and certain executives and traders defrauded their clients by brazenly and repeatedly lying to them and then siphoning off millions of dollars through hidden fees,” said Assistant Attorney General Caldwell.
“But they didn’t get away with it. Today’s sentence shows that the Justice Department will require financial companies to answer for taking advantage of their clients’ trust and violating the laws that protect investors in financial markets.”
“Today’s sentencing demonstrates that companies who hide earnings, fabricate transaction reports and provide clients with false details regarding their orders for the purpose of increasing their own bottom line will ultimately pay the price for their schemes,” said Assistant Director in Charge McCabe.
“The FBI will continue to work with our partners to investigate complex international financial crimes and send a message that complete transparency is a requirement in the global trading market.”
“Today’s sentencing is an example of the dedicated work of law enforcement to stop fraud wherever it may be, safeguarding the investments of consumers and protecting the integrity of the financial markets,” said Inspector in Charge Bartlett.
The statement from the FBI said, “ConvergEx Global Markets Limited [CGM Limited], a former broker-dealer registered in Bermuda, pleaded guilty on Dec. 18, 2013. Together with its parent company, ConvergEx Group, which entered into a deferred prosecution agreement on Dec. 18, 2013, CGM Limited will pay a criminal penalty of approximately $18.0 million, forfeit approximately $12.8 million, and will pay defrauded customers approximately $12.8 million in restitution. In total, CGM Limited and ConvergEx Group are paying $43.8 million in criminal penalties and restitution. U.S. District Judge Jose L. Linares in the District of New Jersey imposed the sentence.”
“As CGM Limited admitted when it pleaded guilty, certain ConvergEx Group broker-dealers that provided commission-based brokerage services regularly routed securities trading orders to CGM Limited in Bermuda so that it could take a mark-up [an additional amount paid for the purchase of a security] or mark-down [a reduction of the amount received for the sale of a security] when executing the orders. ConvergEx employees referred to such mark-ups and mark-downs as “spread,” “trading profits,” or “TP.”
“To hide the increased fees, traders at CGM Limited and sales traders at ConvergEx Group subsidiaries sent false transaction reports to clients with fabricated details, including the number of shares involved in a trade, the time at which a trade was executed, and the price at which shares were purchased or sold. In total, CGM Limited took approximately $12.8 million in trading profits from these clients after it had sent the false statements to them.”
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