The Securities and Exchange Commission said Thursday that it has charged New York-based brokerage firm Linkbrokers Derivatives LLC for unlawfully taking secret profits of more than $18 million from customers by adding hidden markups and markdowns to their trades.
According to the SEC’s order instituting administrative proceedings, certain representatives on Linkbrokers’ cash equity desk defrauded customers by purporting to charge them very low commission fees, but in reality extracting fees that in some cases were more than 1,000% greater than represented.
“These brokers hid the true size of the fees they were collecting by misrepresenting the price at which they had bought or sold securities on behalf of their customers,” the SEC said. “The scheme was difficult for customers to detect because the brokers charged the markups and markdowns during times of market volatility in order to conceal the false prices they were reporting to customers.”
Linkbrokers consented to the SEC findings without admitting or denying them and agreed to pay $14 million to settle the SEC’s charges.
The SEC previously charged four former brokers on the cash equities desk at Linkbrokers, and three of them later agreed to settle those charges by consenting to judgments ordering more than $4 million in disgorgement plus interest.
The former brokers who previously agreed to settle the SEC’s charges are Benjamin Chouchane, Marek Leszczynski and Henry Condron, who each also have pleaded guilty to criminal charges.
The SEC’s litigation continues against the fourth former broker, Gregory Reyftmann. The SEC’s investigation is continuing.
“Linkbrokers employees engaged in a devious and abusive trading scheme orchestrated to steal from the firm’s unsuspecting customers,” said Daniel Hawke, chief of the SEC Enforcement Division’s Market Abuse Unit, in a statement. “This settlement strips Linkbrokers of its remaining assets and allows those funds to be returned to harmed customers.”