Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Wednesday, March 10, 2010

SEC Charges Broker with Diverting $3.3 Million of Customer's Funds to Another Customer

The SEC today charged Jose O. Vianna, Jr., a former registered representative at a New York based broker-dealer named Maxim Group LLC ("Maxim"), with a fraudulent scheme to divert millions of dollars in trading profits from a large institutional customer of the broker to another of the broker's customers.  The complaint alleges that Vianna diverted profitable trades from the account of a large Spanish bank, referred to in the Complaint as Customer A, to the account of Creswell Equities, Inc. ("Creswell"), a British Virgin Islands company. The Commission's complaint alleges that over $3.3 million in trading profits were diverted from Customer A to Creswell.

The complaint alleges that 57 times between July 2007 and March 2008, Vianna simultaneously entered orders in the accounts of Customer A and Creswell to trade the same amounts of the same stock. Each time, he placed a buy order in one customer's account and a sell order in the other customer's account. When the market moved to make Customer A's trade profitable and Creswell's trade unprofitable, Vianna improperly misused his access to Maxim's order management system to divert Customer A's profitable trade to Creswell and Creswell's unprofitable trade to Customer A by changing Maxim's records to inaccurately reflect the account for which the orders were entered. However, when the market moved so that Creswell's trade was profitable and Customer A's unprofitable, Vianna let the trades remain as originally entered.

The Commission seeks permanent injunctive relief from Vianna, as well as disgorgement of ill-gotten gains plus prejudgment interest, and civil money penalties.  The Commission's complaint also charges Creswell as a relief defendant, and seeks disgorgement of Creswell's illicit profits, plus prejudgment interest. On March 9, 2010, the Court entered an order temporarily freezing Creswell's assets pending a hearing on the Commission's application to freeze Creswell's assets for the duration of the action.

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Would jail time typically be given in a case such as this?

Posted by: mike smith | Mar 18, 2010 10:59:23 AM

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