A New York-based broker will pay a record $20 million to settle U.S. Securities and Exchange Commission charges that they ran a secret trading desk and misused the confidential trading information of dark pool subscribers

Investment Technology Group (ITG) and its affiliate, AlterNet Securities negotiated the settlement, the largest ever against an alternative trading system, last month ahead of an administrative proceeding charging that the firms traded against their own dark pool clients, according to the SEC.

The SEC alleges that despite telling the public that it was an “agency-only” broker whose interests didn’t conflict with it’s customers, ITG operated a secret trading desk known as “Project Omega” for more than a year. While ITG claimed that it would protect the confidentiality of subscribers’ trading information, during an eight-month period in 2010 and 2011, Project Omega allegedly used live feeds of order and execution information of its subscribers to implement high-frequency trading strategies, including one in which it traded against ITG’s subscribers.

The breach occurred due to Project Omega’s “facilitation strategy,” in which it executed trades based on a live feed of orders that sell-side subscribers sent to ITG’s algorithms for handling, which it accessed through ITG sales and support software. As a result, Project Omega had a real-time view of subscriber orders, was able to open positions on the same side of the market as detected orders, and then close the positions by trading against the detected orders.

Over its lifetime, Project Omega traded approximately 1.3 billion shares, including 262 million shares with unsuspecting subscribers in ITG’s dark pool.

As part of the settlement, the SEC has censured AlterNet and ITG, ordered the firms to admit wrongdoing, and mandated the payment of $2 million in disgorgement fees, $256,000 of prejudgment interest and $18 million in civil penalties.

On Monday, Wayne, Penn.-based shareholder litigation firm Ryan and Maniskas announced a clas action lawsuit against ITG on behalf of its investors.