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UPDATE 2-U.S. charges ex-ConvergEx unit CEO over trading fees
August 7, 2014 / 8:10 PM / 3 years ago

UPDATE 2-U.S. charges ex-ConvergEx unit CEO over trading fees

(Adds attorney for Marshall declined to comment)

By Sarah N. Lynch

WASHINGTON, Aug 7 (Reuters) - The former chief executive and an ex-trader for a defunct brokerage unit of ConvergEx Group LLC have been indicted for allegedly bilking millions of dollars from clients by charging hidden trading fees, the U.S. Justice Department said Thursday.

The indictment, which was returned late on Wednesday and made public on Thursday, charges former ConvergEx Global Markets Ltd CEO Anthony Blumberg, 49, and Craig Marshall, 47, with securities fraud, wire fraud and conspiracy to commit securities and wire fraud.

The U.S. Securities and Exchange Commission on Thursday also announced parallel civil charges against Blumberg, which were filed in a federal court in Newark, New Jersey.

The charges against Blumberg and Marshall come after ConvergEx Group LLC in December separately agreed to pay $150 million to resolve criminal and civil charges into the same conduct.

In addition, former company employees Jonathan Daspin and Thomas Lekargeren also pleaded guilty to criminal conduct at the time.

Seth L. Levine, an attorney at Levine Lee LLP who represents Blumberg, did not have any immediate comment on the charges.

Sean Casey, an attorney at Kobre & Kim LLP representing Marshall, declined to comment.

The government’s case centers on alleged illegal conduct that took place at ConvergEx Global Markets Ltd, a now-defunct brokerage unit previously registered in Bermuda.

Prosecutors claim that brokers routinely routed customers’ orders to the Bermuda-based unit so they could mark up or mark down the price for executed orders.

From 2007 through 2011, they allege that Blumberg and Marshall were able to hide these secret fees by falsifying transactions reports that were sent to clients.

All told, the Justice Department said the “conspirators” in the scheme pocketed about $5.2 million in “spread” from clients.

Prosecutors say Marshall and Blumberg, who also previously served as managing director of the parent company, also violated clients’ instructions to provide “real time” trade data.

In the SEC’s civil case against Blumberg, the agency alleges that one victim of the scheme was a university that paid $93,000 in disclosed commissions, and another $543,000 in undisclosed trading profit. (Reporting by Sarah N. Lynch; Additional reporting by Jonathan Stempel in New York; Editing by Eric Walsh and Andre Grenon)

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