Court Enters Judgment Against Three Wall Street Brokers for Defrauding Customers
The Securities and Exchange Commission announced today that, on January 14, 2014, pursuant to settlement agreements, The Honorable John F. Keenan of the United States District Court for the Southern District of New York entered judgments against defendants Marek Leszczynski, Benjamin Chouchane, and Henry Condron in the SEC’s fraud case, SEC v. Leszczynski, at al., Civil Action No. 1:12-cv-07488 (S.D.N.Y.). The judgments permanently enjoin Leszczynski, Chouchane, and Condron from violations of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. In the judgments, Leszczynski was ordered to disgorge $1,500,000; Chouchane was ordered to disgorge $2,007,408 plus prejudgment interest of $442,169; and Condron was ordered to disgorge $168,336 plus prejudgment interest of $39,339. The Court has reserved the issue of whether to impose a civil penalty on the defendants pending their continued cooperation with the SEC. Acknowledging the facts to which they have admitted as part of their guilty pleas in parallel criminal cases, Leszczynski, Chouchane, and Condron consented to the entry of these judgments.
The SEC charged these brokers, who formerly worked on the cash desk at a New York-based broker-dealer, with illegally overcharging customers $18.7 million by using hidden markups and markdowns and secretly keeping portions of profitable customer trades. The brokers made their scheme difficult for customers to detect because they deceptively charged the markups and markdowns during times of market volatility in order to conceal the fraudulent nature of the prices they were reporting to their customers. The surreptitiously embedded markups and markdowns ranged from a few dollars to $228,000 and involved more than 36,000 transactions during a four-year period.
The SEC further alleged that when a customer placed a limit order seeking to purchase shares at a specified maximum price, the brokers filled the order at the customer’s limit price but used opportune times to sell a portion of that order back to the market to obtain a secret profit for the firm. They falsely reported back to the customer that they could not fill the order at the limit price.
The SEC’s litigation has been conducted by John V. Donnelly III and G. Jeffrey Boujoukos of the Philadelphia Regional Office. The SEC’s investigation was conducted by A. Kristina Littman and Kingdon Kase, under the supervision of Daniel M. Hawke, Chief of the Division of Enforcement’s Market Abuse Unit and Director of the Philadelphia Regional Office.