SEC Charges Four Brokers in an $18.7 Million Illegal Trading Scheme

The Securities and Exchange Commission is charging Marek Leszczynski, Benjamin Chouchane, Gregory Reyftmann, and Henry Condron with allegedly committing an $18.7 million illegal trading scheme at a broker-dealer which specialized in purchasing and selling securities for mostly institutional foreign customers for commissions which ranged from fractions of pennies to two cents. The alleged scheme allegedly took place between 2005 and 2009 and affected an estimated 36,000 transactions.

The scheme allegedly functioned in one of two ways depending on the type of trade the accused were asked to execute. In most cases, they would markup/markdown the prices of the securities they were purchasing and report to the customer the changed price; thus they were able to profit not just from the commission but also from the markups and markdowns. The markups and markdowns ranged in value from a few dollars to $228,000 which the broker-dealer allegedly kept as secret profit. The scheme was successful for so many years because according to the SEC the defendants would only do a markup or markdown when they believed that the discrepancy in prices could be justified by market volatility. The second way by which they perpetrated the scheme according to the SEC, was by taking advantage of “limit orders” which their customers placed. They told the customer that not all the shares they wanted were able to be bought or sold due to the limit order and then proceed to steal a piece of the profit by “buy(ing) or sell(ing) that same stock at a lower or higher price than the price at which the customer’s trade was executed”, which allowed the firm to profit from the difference between the two prices.

All aspects of the scheme were recorded in the firm’s proprietary software which they used to keep track of all sales. According to the filing, the system was set up in such a way that allowed all the people involved to know exactly how much they purchased something for and what they claimed they purchased it for, allowing them to know their profit. This system had input fields programmed in it for “(1) the actual execution price received by Interdealer Broker; (2) the gross price – the price that included the undisclosed markup/markdown; and (3) the net price – the gross price plus the agreed upon commission rate”. This allegedly made it simple to generate false documents for clients since they already had all the information within the proprietary software the firm used.

The four alleged perpetrators each received large bonuses as a result of the extra profits they generated for the firm. The firm that likely employeed them was Linkbrokers Derivatives, LLC. Marek Leszczynski, Benjamin Chouchane, Gregory Reyftmann, and Henry Condron were all employed and registered with FINRA with Linkbrokers at around the time the SEC complaint, according to BrokerCheck.

If you were a victim of the scheme, contact Sonn Law Group to explore your legal options. Sonn Law Group is a nationally recognized law firm representing individuals, trusts, corporations and institutions in claims against brokerage firms, banks and insurance companies. For more information, call toll free 1-877-751-5879 or 305-912-3000.