Ken Serrano Asbury Park Press
Published 6:44 PM EST Feb 11, 2019
An online brokerage firm that state authorities say failed to properly check the background of a Middletown man who defrauded scores of investors through accounts he opened has agreed to pay $100,000 to settle the case against it.
Interactive Brokers LLC also pledged to revise its account opening procedures if necessary to resolve a state Bureau of Securities investigation
Despite previous convictions, Peter Zuck of Middletown, 68, was able to open at least 16 accounts with Interactive for himself, other individuals and Zuck’s hedge fund, Osiris Fund Limited Partnership, state officials said.
Interactive conducted automated checks on Zuck, but failed to perform what’s known as a commodities industry BASIC search that would have shown that Zuck had been barred for life from the National Futures Association for failing to cooperate with a previous investigation, authorities said.
After making profits, Zuck and others associated with him lost $4.5 million in April and May of 2010, state officials said.
“Zuck proceeded to trade the Osiris Fund account in a wildly speculative manner that exposed the investors’ savings to extraordinary market risk,” the state Attorney General’s Office wrote in a statement.
PREVIOUS Middletown hedge fund manager gets three years in prison
They also defrauded investors through false investor account statements outside of Interactive’s system, overstating the hedge fund’s net asset value so they could charge higher management fees, authorities said.
Zuck fraudulently took out $3.9 million in fees, authorities said. For tips on avoiding fraud, scroll to the video above.
In 2017, Zuck was sentenced to three years in state prison for wire fraud and tax evasion in connection with the scheme.
Zuck admitted he and other hedge fund members convinced 76 people to invest around $12 million into the hedge fund, authorities said.
Zuck was sentenced nearly three years after he and several other fund members reached a $55 million settlement with the state for selling unregistered securities and participating in fraudulent business practices.
Ken Serrano: 732-643-4029; [email protected]
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