Former Bermuda trader falsified records
A Bermuda-based former trader at an Island company yesterday admitted conspiracy to cook the books at his firm.
Michael Craig Marshall, who worked for ConvergEx Global Markets (CGM), pleaded guilty in a US court to one charge of conspiracy to falsify books and records at the broker-dealer.
Marshall, 47, admitted the offence at the US District Court, District of New Jersey.
The court heard that CGM and US broker-dealer G-Trade Services, both wholly-owned subsidiaries of ConvergEx, were involved.
As part of his plea, Marshall admitted that clients placed orders to buy or sell securities with G-Trade, which then routed the orders to CGM.
He also admitted that CGM traders regularly added a mark up or a mark down — where the amount received for the sale of a security is reduced — when executing the orders.
Staff at CGM, G-Trade and other ConvergEx Group firms called the mark ups and mark downs “spread” or “trading profits”.
Marshall said that he reviewed false transaction reports for two trades carried out in August 2009 to verify falsified data about quantities, prices and times of purchases reflected on the report matched actual trades that had been executed on August 7 that year.
The reports, provided to clients, hid the fact that “spread” had been taken on the brokerage orders.
Jonathan Daspin, the head trader at the now-closed Bermuda CGM office, Thomas Lekargen, a sales trader from a different arm of the company, both pleaded guilty in December 2013 to conspiracy to commit securities and wire fraud.
The Bermuda office of ConvergEx booked nearly $13 million in trading profits from clients after is sent false statements to clients to hide its overcharging.
ConvergEx admitted its staff had repeatedly overcharged investors, including pension funds and institutional investors, through hidden fees.
The ConvergEx parent firm, as part of a settlement, paid $43.8 million and signed a deferred prosecution agreement with the US Department of Justice to avoid criminal charges.
It also handed over a total of $107 million to the Securities and Exchange Commission and admitted wrongdoing to settle related civil charges.