The former CEO and a former senior vice president of ConvergEx Global Markets (CGM) were indicted on the 6 August in a federal court for allegedly concealing additional fees fraudulently charged to clients in connection with orders to buy and sell securities.
Anthony Blumberg of New Jersey and Craig Marshall of Bermuda concealed the fees as ‘trading profits’. 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 announced civil charges against Blumberg.
Assistant attorney general Leslie Caldwell for the Justice Department’s Criminal Division, said: “The former CEO and a senior vice president of ConvergEx…have been in charged in connection with a scheme to bilk millions of dollars from clients, then conceal the fraud from their client victims.”
“The Justice Department’s Criminal Division will bring to justice those who fleece investors in the financial markets, particularly high-level executives and sophisticated traders.”
According to the allegations, certain ConvergEx Group broker-dealers regularly routed securities orders to CGM in Bermuda so that it could take a mark-up or mark-down when executing orders. Between 2007 and 2001, to hide the changed marks, Blumberg, Marshall and others sent false transaction reports to clients with fabricated details regarding the transactions executed during the course of a day to complete a client’s orders.
The falsified reports included the number of shares involved in a transaction, the time at which the transaction was executed and the price at which shares were either purchased or sold.
Previously filed court documents show that CGM traders, including Marshall, created these false reports using exchange data from transactions entered into by others on the same trade date as the trades that had been executed by CGM on behalf of its clients.
Rather than providing the real-time data to clients, the data feed was turned off for sections of the order and mark-ups or mark-downs were made. On several occasions, when the client asked why the feed was not receiving real-time data, the client was told IT problems were to blame.
The charges in the indictment have not yet been proven true, and the defendants are presumed innocent unless and until proven guilty. The FBI’s Washington Field Office and the Washington D.C. and New York offices of the US Postal Inspection Service are investigating the case.
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