The U.S. Securities and Exchange Commission is charging Linkbrokers Derivatives LLC with involvement in an $18 million fraud scam . The New York-based firm, which is no longer a broker-dealer, is settling the charges by paying $14 million.
According to the regulator, brokers at Linkbrokers secretly manipulated the costs of securities trades that it processed. They promised low commission fees and then charged fees that were 1,000% more than what they misrepresented they would be.
Over 36,000 transactions were involved in the securities fraud, which took place between 2005 and 2009. The SEC has already charged a number of brokers at Linkbrokers’ cash equities desk over this matter.
The brokers are accused of secretly raising or lowering trade prices while hiding the actual prices. The alleged manipulations usually took place during times when the market was more volatile and when prices were expected to fluctuate. Although illicit profits in some instances were minimal, they eventually added up. Three of the brokers settled the SEC fraud charges against them for around $4 million. Criminal charges also were filed.
The securities fraud settlement strips the firm of what assets it had left. The money will go to customers that were harmed.
By settling, Linkbrokers is not denying or admitting to the securities charges. Also, it is going to withdraw its broker-dealer registration.
Linkbrokers executed high-volume trades for institutional customers. However, certain institutional clients, such as pension funds and mutual funds, invested the money of smaller investors, meaning that these customers too were affected.
Contact our institutional investor fraud lawyers today.
SEC Charges N.Y.-Based Brokerage Firm With Overcharging Customers in $18 Million Scheme, SEC, August 14, 2014
The SEC Order (PDF)
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