Fourth Guilty Plea in Burgeoning Securities Scheme

Jose L. Linares, U.S. District Judge
Jose L. Linares, U.S. District Judge

A growing list of people have plead guilty to fraud related charges in a burgeoning securities trading scheme.

Arthur Blumberg, 53, became the fourth person the plead guilty to securities laws violations in connection with schemes perpetrated at ConvergEx Group and CGM Limited’s practices, according to the US Department of Justice.

“Anthony Blumberg, 53, of Short Hills, New Jersey, pleaded guilty before U.S. District Judge Jose L. Linares of the District of New Jersey, in Newark, to one count of conspiracy to commit securities and wire fraud.” According to a US Department of Justice statement. “Sentencing has been scheduled for Dec. 5 before Chief Judge Linares.

“According to court documents, CGM Limited was a wholly owned subsidiary of ConvergEx Group LLC (ConvergEx Group’).   As part of his plea today, Blumberg admitted that clients placed orders to buy or sell securities with G-Trade Services LLC and ConvergEx Limited, subsidiaries of ConvergEx Group that offered global trading services to clients, which in turn routed orders to CGM Limited.  Blumberg also admitted that traders at CGM Limited executed the orders and sometimes added a ‘spread,’ (a mark-down on the sale of a security or a mark-up on the purchase of a security) to the prices they had obtained for non-fiduciary clients.  To hide the fact that spread had been taken, on several occasions from 2007 to 2011, Blumberg and traders acting under his direction, acting in response to requests by clients for information that could reveal the existence of spread, sent false reports (known as time and sales reports) to these clients.  The false time and sales reports contained fabricated details regarding the individual transactions, or “fills,” executed during the course of a day to complete a client’s orders, including false information concerning the number of shares involved in a fill, the time at which the fill was executed, and the price at which shares were either purchased or sold.”

“Blumberg is the fourth individual to plead guilty as a result of the investigation into ConvergEx Group and CGM Limited’s practices.  On Dec. 18, 2013, CGM Limited pleaded guilty to conspiracy to commit securities and wire fraud before Judge Linares.  On the same day, ConvergEx Group entered into a deferred prosecution agreement.  Collectively, the two ConvergEx entities paid $43.8 million in criminal penalties and restitution.” The US DOJ said later in the same statement.

The case has tentacles in current US events.

On November 19, 2014, the USDOJ announced that it had secured criminal penalties against CGM Limited.

Andrew McCabe, as the head of the field office in Washington D.C. for the Federal Bureau of Investigation where this was investigated, was one of those listed as making the announcement.

McCabe has been accused by President Trump and his allies of bias against the President; news reports have tied McCabe to both the Russia investigation and the investigation into the Clinton Foundation, which has yet to bring any charges.