SEC Charges Rogue Trader Who Bankrupted His Firm
Litigation Release No. 25239 / October 1, 2021
Securities and Exchange Commission v. Keith A. Wakefield, No. 1:21-cv-05168 (N.D. Ill. filed September 30, 2021)
The Securities and Exchange Commission charged Keith A. Wakefield, a former managing director and head of fixed income trading at IFS Securities, Inc., an Atlanta-based broker-dealer, with causing millions of dollars of losses through unauthorized trading in fixed income securities, and with fraudulently obtaining approximately $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 unauthorized speculative trading in U.S. 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 $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 honor millions of dollars in unauthorized 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.
The SEC's complaint charges Wakefield with violations of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder, and with aiding and abetting IFS's violations of Exchange Act Section 17(a)(1) and Rule 17a-3 thereunder for failure to maintain accurate books and records, and Exchange Act Section 15(c)(3) and Rule 15c3-1 thereunder for failure to 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 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, including Som P. Dalal, Natalie G. Garner, Kristin M. Pauley, Alyssa Qualls, Brian D. Fagel, Mark R. Zehner, and Terrence Moran, and Michael P. Fioribello of the New York Regional Office. The investigation is being supervised by Public Finance Abuse Unit Chief LeeAnn G. Gaunt and Ms. Pyszka. The SEC appreciates the assistance of the U.S. Attorney's Office for the Northern District of Illinois, the Federal Bureau of Investigation, and the Financial Industry Regulatory Authority.