A former Bermuda-based broker and dealer has been hit with a massive $26 million in fines and compensation.

ConvergEx Global Markets Ltd (CGM) — which closed its doors in 2012 — was ordered to pay the cash by a New Jersey court after it admitted wire fraud and conspiracy to commit securities and wire fraud in relation to a scheme to charge clients millions of dollars in unwarranted and hidden fees.

US Assistant Attorney General Leslie Caldwell, of the American Justice Department’s criminal division, said that “certain executives and lenders defrauded their clients by brazenly and repeatedly lying to them and then siphoning off millions of dollars through hidden fees.

“But they didn’t get away with it.”

And he added the verdict “shows that the Justice Department will require financial companies to answer for taking advantage of their clients’ trust and violating the laws that protect investors in financial markets.”

FBI Assistant Director in Charge of the agency’s Washington office Andrew McCabe said: “The FBI will continue to work with our partners to investigate complicated international financial crimes and send a message that complete transparency is a requirement in the global trading market.”

CGM pleaded guilty to the offences almost a year ago.

Now, together with its parent firm, global brokerage and trading firm ConvergEx Group, which entered into a deferred prosecution arrangement last year, CM will pay a criminal penalty of around $18 million, forfeit $12.8 million and will compensate defrauded customers with payments of around $12.8 million.

In total, the two firms will stump up a total of $43.8 million.

CGM admitted that some ConvergEx Group broker-dealers that provided commission-based brokerage services regularly routed securities trading orders to CGM in Bermuda so that it could take an additional amount paid for the purchase of a security or a mark down — a reduction of the amount received for the sale of a security — when executing the orders.

ConvergEx staff referred to the mark ups and mark downs as ‘spread’ or ‘trading profits.’

To hide the increased fees, traders at CGM and sales traders at ConvergEx Group subsidiaries sent false transaction reports to clients with fabricated details, including the number of shares involved in a trade, the time at which a trade was executed and the price at which shares were bought or sold.

In total, CGM took around $12.8 million in profits from these clients after it had sent the false statements to them.

CGM head trader Jonathan Daspin and Thomas Lekargeren, a sales trader at a different ConvergEx Group subsidiary, both pleaded guilty last year to conspiracy to commit securities and wire fraud.

Earlier this year, the former CEO of CGM, Anthony Blumberg and former Bermuda-based CGM trader Craig Marshall were charged with wire fraud and conspiracy to commit securities and wire fraud. Blumberg were also charged with securities fraud.

As part of ConvergEx’s deferred prosecution agreement, the Justice Department highlighted the group’s extensive cooperation, its internal investigation as well as its remediation and improved compliance programme.