In the Matter of G-Trade Services LLC, et al.
Admin. Proc. File No. 3-15654
In the Matter of Jonathan Samuel Daspin
Admin. Proc. File No. 3-15652
In the Matter of Thomas Lekargeren
Admin. Proc. File No. 3-15653
SEC v. Craig S. Lax
Case No. 15-cv-01079-WHW-CLW (D.N.J.)
SEC v. Khaled “Kal” Bassily
Case No. 16-cv-02733-RJS (S.D.N.Y.)
On December 18, 2013, the Commission instituted and simultaneously settled administrative and cease-and-desist proceedings (the “Order”) against G-Trade Services LLC (“G-Trade”), ConvergEx Global Markets Limited (“CGM”), and ConvergEx Execution Solutions LLC (collectively, the “Respondents”). In the Order, the Commission found that, from 2006 to 2011, the Respondents violated federal securities laws by engaging in a fraudulent scheme to intentionally or recklessly conceal their practice of unnecessarily routing certain global trading and transition management customer orders to an offshore affiliate, in order to charge undisclosed mark-ups and mark-downs, in addition to disclosed commissions on those orders.
The Commission ordered, and the Respondents have paid, a total of $107,424,429.00 in disgorgement, prejudgment interest, and civil money penalty to the Commission. The Commission created a Fair Fund, pursuant to Section 308(a) of the Sarbanes-Oxley Act of 2002, as amended, so the penalty, along with the disgorgement and prejudgment interest, collected could be distributed to those harmed by the Respondents’ conduct described in the Order (the “CGM Fair Fund”). The Commission further ordered funds paid in any related Commission action shall be aggregated with the CGM Fair Fund for distribution to harmed investors, in accordance with any orders issued in those other actions.
Pursuant to the Order, the Respondents shall be the “administrators” of the CGM Fair Fund for tax reporting and compliance purposes. Taxes, tax compliance and any related administrative expenses are the responsibility of the Respondents. See the Commission’s Order: Release No. 34-71128.
Contemporaneously with the Order, the Commission instituted and simultaneously settled two, separate but related administrative and cease-and-desist proceedings against two former employees, Jonathan Samuel Daspin (“Daspin”) and Thomas Lekargeren (“Lekargeren”) for their roles in the fraudulent scheme described in the Order. Daspin was ordered to pay a total of $1,111,550.00 in disgorgement and prejudgment interest. Lekargeren was ordered to pay a total of $117,042.00 in disgorgement and prejudgment interest. The Commission ordered for both Daspin and Lekargeren’s payments to be added to the CGM Fair Fund for distribution to harmed investors. See the Commission’s Orders: Release Nos. 34-71126 and 34-71127.
On May 9, 2014, the Commission published a notice of the proposed plan of distribution and opportunity for comment and simultaneously published the proposed plan of distribution (“Proposed Plan”). The notice provided the public with 30 days to submit their comments on the Proposed Plan. See the Commission’s Notice: Release No. 34-72146 and the Proposed Plan.
On December 17, 2014, the Commission issued an order appointing The Garden City Group as the Fund Administrator to oversee the administration and distribution of the CGM Fair Fund, and set the administrator’s bond amount. See the Commission’s Order: Release No. 34-73865.
On February 10, 2015, Craig S. Lax (“Lax”), another former employee, agreed to settle charges filed by the Commission, in a related district court action, for his role in the fraudulent scheme described in the Order. On March 11, 2015, the Court entered a judgment against Lax requiring him to pay a total of $783,297.00 in disgorgement and prejudgment interest. The Court ordered Lax’s payments to be combined with the CGM Fair Fund for distribution to investors. See Lax’s Judgment.
Comments were received on the Proposed Plan during the comment period. After considering the comments received, a distribution plan was prepared, which modified the Proposed Plan to address the comments (the “Plan”). On July 24, 2015, the Commission issued an order approving the Plan and published the approved Plan. See the Commission’s Order: Release No. 34-75519 and the Plan.
The CGM Fair Fund is comprised of the $107,424,429.00 paid by the Respondents; plus the $2,011,889.00 received from the three settled, related actions; and any additional payments arising from additional related actions that the Commission may order to be aggregated into the CGM Fair Fund. The Plan provides that the distribution of theCGM Fair Fund shall be made to refund a portion of the trading profits taken from Respondents’ customers between October 2, 2006 and December 31, 2011. The methodology provides the Respondents’ customers full refunds of trading profits on U.S. securities and pro-rata refunds of trading profits on non-U.S. securities. Customers will receive a payment in an amount equal to (a) the trading profits on U.S. securities, (b) a pro-rata portion of the trading profits on non-U.S. securities, or, where applicable, both (a) and (b).
The Commission has issued orders approving five disbursements, totaling $80,655,792.02, from the CGM Fair Fund for distribution to eligible customers. See the Commission’s Orders: Release Nos. 34-79235, 34-80078, 34-80232, 34-81571, and 34-81695.
On December 21, 2017, Khaled “Kal” Bassily (“Bassily”), another former employee, agreed to settle charges filed by the Commission, in a related district court action, for his role in the fraudulent scheme described in the Order. The Court entered a judgment against Bassily requiring him to pay a total of $988,414.00 in disgorgement, prejudgment interest, and civil penalty. The Court established a fair fund for the funds paid by Bassily (“Bassily Fair Fund”), and ordered the Commission transfer the Bassily Fair Fund, plus interest earned, minus court registry fees, taxes and expenses into the CGM Fair Fund for distribution to investors. See Bassily’s Final Judgment.
For more information, please contact the Fund Administrator: