In an enforcement action filed in federal court last week, the Securities and Exchange Commission alleged that Keith Wakefield, the former head of fixed income trading at IFS Securities, engaged in unauthorized trading in fixed income investments causing the loss of millions and fraudulently generated over $800,000 in fictitious commission revenues, all of which ultimately caused IFS Securities to file for bankruptcy.
In particular, the SEC’s Complaint claims that Wakefield embarked on an unauthorized, high-risk trading spree in U.S. Treasuries while trading for IFS and lost it millions. Wakefield, according to the SEC’s allegations, attempted to hide his massive trading losses by falsifying the firm’s books and records to create the illusion that his trades were profitable. Wakefield’s fraudulent scheme did not end there, as the SEC also contends that he illegally obtained over $800,000 in commission revenues from his firm based upon fabricated commission customer payments.
In August 2019, the music stopped when IFS could not satisfy millions of dollars in Wakefield’s unauthorized fixed income trades involving at least twelve counter-parties. The securities broker-dealer was thus forced out of business and filed for bankruptcy.
In a parallel proceeding, Wakefield was criminally charged by the U.S. Attorney’s Office.
Wakefield settled with the SEC in what is commonly referred to as a “bifurcated settlement.” In this settlement structure, he consented to the charges, presumably on a neither admit nor deny basis, but the amount of disgorgement, prejudgment interest and civil penalty are left open for resolution by the court at a later time. While a downside of this settlement structure is that the defendant must agree that the complaint’s allegations of wrongdoing are true and correct for purposes of the Court’s ruling on the financial remedies, it will position Wakefield to seek a waiver of the SEC civil penalty in the event he ultimately pleads guilty in the criminal case. That could prove to be his best trade yet.
David Chase, Esq. is an SEC defense lawyer, former Senior Counsel with the SEC’s Division of Enforcement and an Adjunct Professor of Law at the University of Miami School of Law where he teaches SEC Regulation. His SEC defense law firm, based in South Florida, represents nationwide those under SEC investigation and prosecution. Mr. Chase may be contacted toll-free at: 800-760-0912, or email at firstname.lastname@example.org. Firm website: securitiesfrauddefense.net.