Brokers Face Possible Prison Time for Overcharging Clients Pennies Per Share

Two securities brokers from New York faced criminal charges from the Department of Justice last week for allegedly adding a few pennies to the cost of securities traded by the Linkbrokers Derivatives firm. Authorities say the alleged scheme allowed the firm to earn $18.7 million.

The securities brokers are Marek Leszczynski and Benjamin Chouchane.  Henry A. Condon, sales leader at the Linkbrokers firm has already pled guilty to related charges. Linkbrokers is a high volume trading firm that works on behalf of large institutional customers including many hedge funds.

The complaints were filed in the Federal District Court in Manhattan. The complaints accuse Leszczynski and Chouchane of charging a marginally higher price or slightly lowering the sale price of securities then hiding the actual costs from clients. The Securities Exchange Commission claims that the duo made more than 36,000 trades from 2006 to 2010. The two allegedly defrauded customers by much as $228,000 in a single transaction.

The duo played with prices during market volatility. Usually institutional entities scrutinize orders and trading costs, but during market volatility it is harder to ascertain when securities are being fraudently priced.

Leszczynski’s attorney stated that his Leszczynski was “astonished” to have been charged with this crime, he admits no fault.

The two brokers did not directly benefit from the increased price hikes. Rather, they benefitted from the higher bonuses received from the profits they generated. The criminal complaints mention that Leszczynski received bonuses ranging between $600,000 to $2.4 million in the years in question. Likewise Chouchane received bonuses in excess of $ 1.2 to $2 million.

Evidence for these types of securities fraud are difficult to provide. The Department of Justice will have to show that Leszczynski and Chouchane’s securities trading practices showed a pattern of fraud. Both men face up to 25 years in prison if convicted of both charges.

Two securities brokers from New York faced criminal charges from the Department of Justice last week for allegedly adding a few pennies to the cost of securities traded by the Linkbrokers Derivatives firm. Authorities say the alleged scheme allowed the firm to earn $18.7 million.

The securities brokers are Marek Leszczynski and Benjamin Chouchane.  Henry A. Condon, sales leader at the Linkbrokers firm has already pled guilty to related charges. Linkbrokers is a high volume trading firm that works on behalf of large institutional customers including many hedge funds.

The complaints were filed in the Federal District Court in Manhattan. The complaints accuse Leszczynski and Chouchane of charging a marginally higher price or slightly lowering the sale price of securities then hiding the actual costs from clients. The Securities Exchange Commission claims that the duo made more than 36,000 trades from 2006 to 2010. The two allegedly defrauded customers by much as $228,000 in a single transaction.

The duo played with prices during market volatility. Usually institutional entities scrutinize orders and trading costs, but during market volatility it is harder to ascertain when securities are being fraudently priced.

Leszczynski’s attorney stated that his Leszczynski was “astonished” to have been charged with this crime, he admits no fault.

The two brokers did not directly benefit from the increased price hikes. Rather, they benefitted from the higher bonuses received from the profits they generated. The criminal complaints mention that Leszczynski received bonuses ranging between $600,000 to $2.4 million in the years in question. Likewise Chouchane received bonuses in excess of $ 1.2 to $2 million.

Evidence for these types of securities fraud are difficult to provide. The Department of Justice will have to show that Leszczynski and Chouchane’s securities trading practices showed a pattern of fraud. Both men face up to 25 years in prison if convicted of both charges.

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