A single brokerage firm, NevWest Securities, utilizing clearing firm Computer Clearing Services (now owned by Penson Worldwide, Inc.) helped John Edwards trade over 250 billion shares of CMKX stock totaling over $53 million. Almost two years after the fact, the NASD (now FINRA) charged NevWest with "failing to file Suspicious Activity Reports (‘SAR’), or cease trading in multiple accounts owned and controlled" by Edwards. In the 28-page complaint, the NASD also charged NevWest with failing to “adequately perform due diligence, file SARs, or cease effecting wire transfers involving $43 million through 139 separate wires from at least 28 of the accounts John Edwards had opened at NevWest to various bank accountsâ€. In what has become the norm in securities fraud cases, NevWest received little more than a slap on the wrist for their part in the scam, eventually paying a token fine of just $100,000 “without admitting or denying the allegations of the Complaint".
More troubling still are the phone records from NevWest, which show that they contacted the SEC each time Edwards came in with CMKX certs to sell, many of which were clearly forged and fraudulent, some even "signed" by an individual who had been deceased for months. Instead of taking action to halt the obvious fraud against innocent shareholders, the SEC and NASD (FINRA) ignored the evidence and dozens of other red flags, allowing the scheme to continue unabated, costing unsuspecting buyers of CMKX stock hundreds of millions of dollars.
In another series of violations ignored by federal regulators, on May 6, 2005, clearing firm Jefferies and Co. sent a letter to both the NASD (FINRA) and the SEC admitting they had traded 111 billion shares of CMKX outside the system, or "ex-clearing". Jefferies said that they made a "business and operational risk decision to allow a limited number of broker-dealer customers" who were long sellers of CMKX to settle trades outside the clearing system. In the month of July, 2005 alone, Jefferies did 80 transactions involving CMKX through ex-clearing. Shortly afterwards, Jefferies and Co. announced record revenues and earnings for the quarter ending September, 2005. The NASD, then under the leadership of Mary Shapiro, waited a full year after receiving the letter to charge broker NevWest with trading violations, and never filed a single charge against Jefferies or any other broker.
original post by king1000
