Barred Broker Who Bankrupted BD Is Charged With Fraud: DOJ

Fake Trades and Commissions

From 2017 to 2019, Wakefield knowingly and fraudulently engaged in unauthorized speculative trading in U.S. Treasury bonds using his firm's trading accounts, causing more than $30 million in losses to the employer and its counterparties, the DOJ's complaint alleged.

Wakefield tried to conceal his unauthorized trades and losses by entering fake off-setting trades into a clearing broker's order system, creating the false impression that he had profitably traded via a different clearing broker, the DOJ's complaint alleged.

Wakefield also allegedly embezzled about $820,000 from his firm by falsifying the company's books and records to create fake commissions that Wakefield knew were not actually owed to him, according to the DOJ.

The SEC's Action

The SEC's parallel action made the same allegations against Wakefield. According to that complaint, Wakefield's fraud ended in August 2019 when IFS was unable to honor millions of dollars in unauthorized fixed income securities trades executed by Wakefield with more than one dozen counter-parties. IFS was, as a result, forced to close its business, withdraw its registration as a BD and file for bankruptcy, the SEC noted.

The SEC's complaint charged Wakefield with violations of the antifraud provisions of the Securities Act of 1933 and Securities Exchange Act of 1934.

He agreed to settle the SEC's charges by consenting to a permanent injunction and to pay disgorgement plus prejudgment interest and a civil penalty in amounts to be determined by the court at a later date, the SEC said. The settlement is subject to court approval.

The SEC had earlier issued an order stating it censured IFS for acting negligently in selling bonds and selling them at a price below market price for comparable bonds, violating securities laws. The firm was also ordered to pay a civil penalty of $50,000 to the SEC, of which $12,500 was to be transferred to the Municipal Securities Rulemaking Board.