Two formerly registered brokers will pay more than $5 million for alleged unauthorized trading that netted them more than $2.4 million over two months, the Securities and Exchange Commission said.
In a final judgment issued by the U.S. District Court for the Eastern District of New York last week, Jonah Engler was ordered to disgorge $1.44 million in ill-gotten gains plus prejudgment interest of $440,000 and to pay a civil penalty of almost $2.3 million. Barbara Desiderio was ordered to pay $391,000 in disgorgement, $114,140 in prejudgment interest and a civil penalty of $391,000.
Neither Engler nor Desiderio could be reached by the time this story was filed.
According to the original complaint filed March 31, 2020, Engler and Desiderio together ran Global Arena Capital Corp. in New York, with Desiderio acting as president and CEO. On the record, Engler was listed as a registered representative, but in actuality, the SEC said, he controlled the business.
In early 2015, Engler attempted to transfer ownership of Global Arena to another holding company, but by March of that year learned Finra would not approve the application based on their scrutiny of Global Arena’s sales practices, the complaint stated.
Anticipating that Finra would force him to close the firm (it did on June 5, 2015, according to BrokerCheck), Engler directed two registered representatives, Joshua Turney and Hector Perez, to engage in a flurry of unauthorized trading to generate additional commission revenue, and Desiderio assisted in the scheme, the complaint said.
“Turney and Perez attempted to cover up their unauthorized trading by making fake calls to their customers that included, for example, leaving long voicemails with their customers or placing the call on mute if the customer answered the phone, in an attempt to falsely suggest that the customer had authorized the trading,” the complaint stated. “Defendants also routinely used system codes of other registered representatives at Global to obscure that Turney and Perez were the representatives responsible for these unauthorized trades—and in at least one instance, paid off a Global registered representative with a share of commissions in exchange for looking the other way while they fraudulently used his code.”
Between April 1, 2015, and June 4, 2015, about 4,500 unauthorized trades were executed in about 360 customer accounts. Of the $2.4 million in commission generated from those trades, Engler received about $1.1 million, Desiderio more than $390,000, Turney more than $280,000 and Perez more than $135,000, the complaint said.
Meanwhile, the customers had net losses of more than $4 million, the complaint said.
On March 31, 2020, the SEC charged Engler, Turney and Perez with violations of the Securities Act and the Exchange Act, and Desiderio with aiding and abetting in those violations. The allegations against Turney and Perez are still being litigated.
Global Arena was officially expelled from Finra on January 4, 2016, fined $1 million and ordered to disgorge $333,000, according to BrokerCheck.
Engler, who racked up 21 disclosures in 14 years as a registered broker, was permanently barred from the industry on September 24, 2021. Desiderio, who had seven disclosures, all at Global Arena, across a 21-year career, was permanently barred on August 11, 2020, according to BrokerCheck.