Bond-trading broker-dealer charged for allegedly bankrupting firm

Dan Barnes

The Securities and Exchange Commission (SEC) has charged Keith Wakefield, a former managing director and head of fixed income trading at IFS Securities, an Atlanta-based broker-dealer, with causing millions of dollars of losses through allegedly unauthorised trading in fixed income securities, and with fraudulently obtaining approximately US$820,000 in fictitious commission income.

The SEC’s complaint, filed in federal district court in Chicago, alleges that from June through August 2019, Wakefield engaged in unauthorised speculative trading in US Treasury securities, on behalf of IFS, and incurred millions of dollars in losses for the firm. The complaint further alleges that Wakefield engaged in a variety of fraudulent practices to create the appearance of fictitious trading profits and disguise his unauthorized trading losses, including falsifying IFS’s books and records.

As alleged, from January 2017 through August 2019, Wakefield also fraudulently obtained approximately US$820,000 in commission income from IFS based on fictitious commission payments from customers that he fabricated and recorded on IFS’s books and records. According to the complaint, Wakefield’s fraud came to an end in August 2019 when IFS was unable to honour millions of dollars in unauthorised fixed income securities trades executed by Wakefield with more than one dozen counter-parties. As a result, IFS was forced to close its business, withdraw its registration as a broker-dealer, and file for bankruptcy.

“As alleged in the complaint, Wakefield engaged in unauthorised speculative trading on behalf of IFS that caused the bankruptcy of the firm and substantial losses to the counter-parties to the trades,” said Kathryn Pyszka, associate regional director of the SEC’s Chicago Regional Office. “We will vigorously pursue those who engage in misconduct that undermines the integrity of our markets.”

The SEC’s complaint charges Wakefield with violations of the anti-fraud provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934, and with aiding and abetting IFS’s failure to maintain accurate books and records and operate with sufficient net capital. Wakefield has 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 settlement is subject to court approval.

In a parallel action, the U.S. Attorney’s Office for the Northern District of Illinois today announced criminal charges against Wakefield for related misconduct.

The SEC’s continuing investigation is being conducted by the Public Finance Abuse Unit and Chicago Regional Office, and Michael Fioribello of the New York Regional Office. The investigation is being supervised by Public Finance Abuse Unit chief, LeeAnn Gaunt and Pyszka.

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