Interactive Brokers to pay $100K fine for allowing convicted felon to trade.

T

traderob

Interactive Brokers LLC has agreed to pay a $100,000 fine to resolve a New Jersey Bureau of Securities investigation related to a financial scam perpetrated on Interactive’s online trading platform. The Division of Consumer Affairs and the Bureau of Securities today made the relevant announcement.

The scam was run by three-time convicted financial felon Peter Zuck who used Interactive Brokers’s online trading platform in a scheme to defraud investors in his Osiris Fund Limited Partnership.

The Bureau has found that Zuck was able to open at least 16 accounts on the Interactive Brokers’ platform – two master accounts in his own name and eleven sub-accounts in the names of other individuals that were linked to the Zuck master account, as well as in the name of the Osiris Fund.

https://financefeeds.com/interactiv...fine-allowing-convicted-felon-trade-platform/
 
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It seems that it was more of an issue of being banned by the NFA than that he was a felon.

"Interactive Brokers has been found to have failed to conduct a BASIC search on Zuck that would have revealed that he had been permanently barred by the National Futures Association (NFA) for failing to cooperate in an investigation, unrelated to the Osiris Fund matter, regarding his potential embezzlement of client funds."
 
"Interactive Brokers allowed a three-time convicted felon, who had been barred by the NFA, to open accounts and trade other people’s money on its platform where he recklessly traded millions of dollars,”

I'm curious if he was able to make any money on his second attempt. How did he manage to raise millions of dollars? Are there really people that just hand over money to strangers without doing any basic research on track record? Did he have an AM radio show where he reads the closing price of stock tickers for 20 minutes and fills the other 40 minutes with political commentary and advertisements?
 
100K is a drop in the bucket. The only thing of concern that comes to mind for me is, I hope this doesn't have implications about more hoops that IB (and/or other brokers) might make me jump through in the future to ensure that they don't have any more "convicted felons" using their services...
 
Why do they need more hoops? Can't they simply find all the information that they need by the SSN submitted on the application? I assume that FINRA or similar agency maintains a blacklist of people that are barred from opening accounts. All they would have to do is check against that.
 
ET180 said:
Why do they need more hoops? Can't they simply find all the information that they need by the SSN submitted on the application? I assume that FINRA or similar agency maintains a blacklist of people that are barred from opening accounts. All they would have to do is check against that.
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They do (have a list of SS#).

This assumes that he lied on his application and possibly used a bogus SS number. Ostensibly IB wouldn't know until some time after they produced/reported a 1099.
 
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