Ex-IFS Securities trader Keith Wakefield committed securities and wire fraud when, as the broker-dealer’s head of fixed income, the Chicago resident made forbidden speculative trades and embezzled hundreds of thousands of dollars over a two-year period, an Illinois federal court jury found this week.
According
The firm’s CEO had explicitly barred Wakefield from trading Treasury bonds or engaging in any speculative securities trading. But from January 2017 to August 2019, Wakefield used the company’s trading accounts to make speculative trades in Treasury bonds, incurring more than $30 million in losses to the firm and its counterparties, as described in
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Wakefield, 50, also was found to have embezzled $820,000 in commission income derived from fraudulent commission payments from customers. He falsified IFS’s books to make it seem that his trades had been profitable when in fact they had generated losses.
A grand jury indictment filed Nov. 22, 2021, charged Wakefield with four counts of violating sections of Title 17 and Title 18 of the U.S. Code.
In court, Wakefield testified that despite his eight-year tenure as head of fixed income at IFS and his previous roles at Cabrera Capital Markets and LaSalle Financial Services, his $30 million in losses were the result of unsophisticated errors: one buy mistake — in which he sold $40 million of 10-year bonds planning to buy them back before market close, then got stuck in a meeting — and a “fat-finger” mistake, Law360 reported. Wakefield’s attorneys at Blaine & Vanzant LLP did not respond to a request for comment.
The U.S. Attorney’s Office said Wakefield had decades of experience in fixed income and knowingly and willingly engaged in fraudulent trading.
When Wakefield’s misconduct
Wakefield had once been allowed to make speculative trades in Treasuries, but in late 2013, he lost $215,000 of IFS funds. He was then banned from speculative trading. From February 2014 onward, IFS leadership only allowed Wakefield to engage in riskless principal transactions associated with customer trades or limited proprietary hedging of the firm’s municipal bond inventory held at risk, according to
The U.S. District Court case included evidence from an August 2019 phone call with Wakefield and ex-IFS chief technology officer Kristiaan Sheedy, Law360 reported. Through the recording, according to the U.S. Attorney’s Office, the jury heard Wakefield himself describing how his trades worked and using the word “fraudulent.”
The jury deliberated for six hours on Wednesday before reaching its decision, Law360 reported. He was convicted of one count of securities fraud and three counts of wire fraud, according to the U.S. Attorney’s Office, which said each count is punishable by a maximum sentence of 20 years in federal prison. U.S. District Judge Steven C. Seeger did not immediately set a sentencing date.
As a result of Wakefield’s unauthorized trades and embezzlement, Atlanta-based IFS in August 2019 found itself unable to honor millions of dollars of fixed income securities trades. It declared bankruptcy in April 2020, according to the SEC’s complaint.
The U.S. Attorney’s Office confirmed that Wakefield had argued IFS could have limited the damage caused by his actions if it had closed his positions differently — akin to an arsonist who lights a forest fire and then complains the fire department wasted water putting it out, according to the U.S. Attorney’s Office.