A Chicago securities trader who bankrupted his $30 million broker-dealer is facing civil and criminal fraud charges, the Securities and Exchange Commission and the U.S. Attorney’s Office for the Northern District of Illinois announced Friday.
Keith A. Wakefield, who was described as a “rogue trader” by the SEC, also fraudulently obtained about $820,000 in fictitious commission income for himself, the SEC said. Wakefield was a former managing director and head of fixed-income trading at IFS Securities, an Atlanta-based broker-dealer. He lost $30 million of the company’s money through unauthorized speculative trading in fixed-income securities, the SEC said. He has agreed to settle the SEC charges.
The U.S. Attorney for the Northern District of Illinois also has charged Wakefield with one count of securities fraud, which is punishable by a maximum sentence of 20 years in federal prison. He attempted to conceal the unauthorized trades and losses by entering fake off-setting trades into a clearing broker’s order system, creating the false impression that he had profitably traded through a different clearing broker, the charge alleges.
The SEC complaint, which was filed in U.S. District Court in Chicago, alleges that from June through August 2019, 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, the complaint said.
He also fraudulently obtained about $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 from January 2017 through August 2019, the complaint said. 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, the complaint said. As a result, IFS was forced to close its business, withdraw its registration as a broker-dealer, and file for bankruptcy, according to the complaint.
Wakefield has agreed to settle the SEC's charges by consenting to a permanent injunction against acting as a trader and to pay disgorgement plus prejudgment interest and a civil penalty in amounts to be determined at a later date.