SEC v. Marek Leszczynski, et al. (S.D.N.Y.).  On October 5, 2012, the SEC announced fraud charges against brokers Marek Leszczynski, Benjamin Chouchane, Gregory Reyftmann, and Henry Condron for taking $18.7 million from customers by overcharging them.   The Defendants were at an interdealer broker (“Interdealer Broker”).  They worked at Interdealer Broker’s “Cash Desk,” and executed buy and sell orders for customers.  They charged small commissions of a few cents or less per share.  After executing orders, however, Reyftmann, Chouchane, or Leszczynski would analyze the transaction and see whether they could make a secret profit above the commission rate to be charged to the customer.  When the price of the security fluctuated sufficiently to conceal the fraud from customers, Reyftmann, Chouchane, or Leszczynski instructed Condron to record a fake execution price that included the secret profit.  Then, Interdealer Broker reported the fake price to the customer as the actual execution price and added on the actual commission.   Interdealer Broker received both the actual commission charged and the fraudulent profit that had been tacked on.  Also, when a customer placed a limit order on a purchase, the Defendants filled the order but would sell a portion of the order back to the market and obtain a secret profit.  They would then lie to the customer by saying they could not fill the order at the limit price.  Additionally, the brokers made millions of dollars in performance bonuses based on the fraudulent earnings they were generating.

The Defendants are charged with violating Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.  The SEC seeks disgorgement with prejudgment interest, civil monetary penalties, and injunctive relief.  In a parallel action, the U.S. Attorney’s Office for the Southern District of New York filed criminal charges against Leszczynski and Chouchane.  Condron has pled guilty to criminal charges.