Former Bermuda-Registered Broker-Dealer Indicted

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federal court in the District of New Jersey.

Federal court in the District of New Jersey.

News Americas, NEWARK, NJ, Fri. Aug. 8, 2014:  The former chief executive officer and a former trader of a former broker-dealer registered in Bermuda has been indicted in federal court in the District of New Jersey.

 Anthony Blumberg, 49, of ConvergEx Global Markets Limited (CGM Limited) has been charged for allegedly concealing additional fees, which they referred to as “trading profits,” fraudulently charged to clients in connection with orders to buy and sell securities.

Blumberg, of New Jersey, and Craig Marshall, 47, of Bermuda, were, respectively, the CEO and a senior vice president involved in trading at CGM Limited.

Blumberg was also an executive managing director of ConvergEx Group LLC, the parent company of CGM Limited.

A federal grand jury returned an indictment charging both Blumberg and Marshall with securities fraud, wire fraud, and conspiracy to commit securities and wire fraud.

In a separate action, the Securities and Exchange Commission (SEC) announced civil charges against Blumberg.

According to the allegations in the indictment, certain ConvergEx Group broker-dealers regularly routed securities 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.

Employees throughout ConvergEx Group and its subsidiaries referred to such mark-ups and mark-downs as “spread,” “trading profits” or “TP.”   T o hide the fact that spread had been taken on trades, from 2007 to 2011, Blumberg, Marshall and others sent false transaction reports to clients with fabricated details regarding the transactions, or “fills,” executed during the course of a day to complete a client’s orders.   These reports falsified details including the number of shares involved in a fill, the time at which the fill was executed and the price at which shares were either purchased or sold.

According to the indictment, Blumberg, Marshall and others agreed to violate a client’s instructions to provide real-time transactional data through an immediate data feed with details of trades that CGM Limited executed for the client.

On Dec. 18, 2013, Jonathan Daspin, the head trader at CGM Limited, Thomas Lekargeren, a sales trader at a different ConvergEx subsidiary, and CGM Limited each pleaded guilty to conspiracy to commit securities and wire fraud before U.S. District Judge Jose L. Linares in the District of New Jersey.   On the same day, ConvergEx Group entered into a deferred prosecution agreement.   Collectively, the two ConvergEx entities paid $43.8 million in criminal penalties and restitution.

 

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