“Wakefield 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 alleged.
According to both the SEC and the U.S. Attorney’s Office, IFS lost roughly $6 million—its total capitalization—and the broker’s counterparties, including Raymond James and INTL FCStone Financial, lost $24 million.
Wakefield’s alleged unauthorized trading ended in August 2019 when IFS was unable honor millions of dollars in Treasury trades, the SEC said. “The counterparties lost over $24 million unwinding the trades that Wakefield surreptitiously executed, an amount well in excess of IFS’s net capital. As a result, IFS was forced to close its business, withdraw its registration as a broker-dealer, and file for bankruptcy,” thte SEC said.
On Nov. 1, 2021, Wakefield settled with the SEC, agreeing to a permanent injunction as a trader and monetary penalties to be decided at a future date, including disgorgement, prejudgment interest and a civil penalty.
Wakefield’s criminal trial is scheduled to begin on June 19, 2023.
This week’s Finra award was the second related to Wakefield’s alleged trading scheme. On Oct. 1, 2021, an arbitration panel awarded $3.1 million to Amherst Pierpont Securities, which claimed Wakefield had involved the firm in four Treasury bond transactions that ended up not being settled and disavowed by IFS. Relying on a smooth transaction, Amherst Pierpont had sold the bonds to counterparties and had to execute additional transactions to cover its short position, the award order said.
On Sept. 25, 2019, Finra had permanently barred Wakefield for refusing to testify in relation to IFS’s filing of Wakefield’s Uniform Termination form.
In a related Finra case, IFS is suing its clearing broker, INTL FCStone, for not alerting the firm to what it claims were obvious signs there was fraudulent activity occurring. According to the filing in May 2020, IFS is seeking $30 million to cover its losses.
Representatives of Raymond James and INTL FCStone, now StoneX Group, could not be reached by press time.