ConvergEx Settles Charges Subsidiary Bilked Clients

Dec 19 2013 | 11:46am ET

Hedge fund services firm ConvergEx Group has agreed to pay more than $150 million and to admit wrongdoing to settle allegations that it overcharged clients and covered it up.

Under a deal with prosecutors, a defunct ConvergEx subsidiary and two former employees have pleaded guilty, and ConvergEx itself has accepted a deferred-prosecution agreement. In addition, the closed Bermuda subsidiary and two other ConvergEx units admitted wrongdoing in a parallel civil case filed by the Securities and Exchange Commission.

According to the SEC, ConvergEx often charged institutional clients double what they thought they were paying by routing trades through the Bermuda unit. This allowed two employees at the firm, Jonathan Daspin and Thomas Lekargeren, to charge "undisclosed mark-ups and mark-downs."

Daspin and Lekargeren have pleaded guilty to conspiracy charges. They are cooperating with prosecutors, whose investigation is ongoing.

ConvergEx "engaged in a concerted and coordinated effort to fleece its clients by charging them millions of dollars in unwarranted fees," Mythili Raman, acting assistant attorney general, said. The firm then hid "those charges from its clients through a pattern of deception."

ConvergEx noted that "the employees who engaged in this misconduct are no longer at the company," that the Bermuda trading desk was closed and "the acitivity associated with these investigations was discontinued two years ago."


In Depth

Virtu Celebrates Another Year Without a Single Day of Losses

Feb 26 2015 | 9:05am ET

High-frequency trading firm Virtu Financial Inc. reported another year without a...

Lifestyle

Hedge Fund Manager Out as Minnesota Wild Minority Owner

Feb 25 2015 | 2:45pm ET

New York hedge fund manager Philip Falcone is no longer a minority owner of the...

Guest Contributor

Risk: How To Get In Front Of The Problem

Feb 26 2015 | 9:53am ET

In considering the topic of risk in the hedge fund world, specifically, the oversight...

 

Editor's Note