Keith Wakefield, the former head of municipal bond trading at the defunct IFS Securities Inc., was found guilty of securities and wire fraud Wednesday, according to a report from Law360, an online courthouse news service.
IFS Securities of Atlanta blew up in the summer of 2019 and was out of business by the beginning of the next year. IFS Securities catered to two types of businesses: independent financial advisors, and institutions and municipalities.
Wakefield was convicted in federal court in the Northern District of Illinois after a jury found he inflated commissions on his trades and entered false and unauthorized trades that caused $30 million in losses, according to the report. Initial reports from 2019 put the losses from the unauthorized trades closer to $10 million.
The case centered on Wakefield's trading activity between 2017 and 2019, which he testified was not an effort to enrich himself but rather cover his hedges and fix significant mistakes he'd made while trading Treasuries and municipal bonds, according to Law360.
Wakefield’s attorney, Holly Blaine, did not return a call Thursday to comment about the report.
The owner of IFS Securities, Alex McKenzie, did not return a call Thursday to comment. McKenzie moved many IFS employees and financial advisors to another firm he owns, San Blas Securities, also in Atlanta.
In 2019, IFS Securities has 160 financial advisors. It also operated an advisory firm, IFS Advisory, which had $600 million in client assets at that time.
One attorney who followed the case said that Wakefield's testimony that he was trying to fix mistakes and made more bad trades as a result didn't stack up.
"It was $30 million that was gone," said Scott Silver, a plaintiff's attorney. "Somewhere in the firm's systems, a big, flashing red light should have gone off. And even if the firm missed it, Wakefield didn’t stop and say, 'I have a problem,' but he chose to violate the law to cover up the bad act.
"This defense of what some people call a fat-finger trade was nonsensical," Silver said. "If it were true, the trader calls the clearing firm and says, 'I screwed up this trade.' The clearing firm reverses it, and the trader takes the consequences of his actions."
The Financial Industry Regulatory Authority Inc. barred Wakefield from working in the securities industry weeks after the initial reports of the disastrous bond trades. The U.S. Attorney's Office charged him with fraud in 2021.
Wakefield's scheme went on for two years before collapsing in August 2019, according to the Department of Justice.
“Wakefield attempted to conceal the unauthorized trades and losses by entering fake offsetting trades into a clearing broker’s order system, creating the false impression that he had profitably traded through a different clearing broker,” the Department of Justice alleged in October 2021.
Wakefield also allegedly embezzled approximately $820,000 from IFS Securities by falsifying the company’s books and records to create fake commissions that Wakefield knew were not actually owed to him, according to the charges.
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