Former A.B. Watley Group Inc. day trader Warren Fellus was fined $3,000 and spared prison or probation after pleading guilty to his role in a scheme to use Merrill Lynch & Co.’s “squawk box.”
U.S. District Judge I. Leo Glasser in Brooklyn, New York, imposed the fine on Fellus today. Fellus testified at the trial that led to the convictions of six defendants, prosecutors in the office of U.S. Attorney Loretta Lynch said in a May 2 letter to Glasser asking for leniency. Fellus pleaded guilty to conspiracy to commit securities fraud in 2005.
“I apologize for what I’ve done,” Fellus told Glasser before the judge imposed sentence. “I’ve tried to correct my wrong. I am a family man and I can assure you this will never, ever happen again.”
Fellus was one of 10 former day traders and managers from New York-based broker-dealer A.B. Watley that the U.S. Securities and Exchange Commission accused of illegally using Merrill’s internal “squawk boxes” -- devices that broadcast orders within a securities firm -- to trade ahead of large institutional trades.
Robert M. Vela, an attorney for Fellus, declined to comment after the hearing.
Form of Punishment
The judge, noting Fellus pleaded guilty six years ago, said, “in effect, that lengthy period of time is a kind of psychological imprisonment which I regard as a form of punishment itself.”
Former Merrill brokers Kenneth Mahaffy Jr. and Timothy O’Connell and four co-defendants were found guilty in April 2009. Last year, the six men lost a bid to have their convictions thrown out after claiming prosecutors hid evidence of their innocence.
Fellus’s “testimony was particularly valuable to the prosecution of Mahaffy and O’Connell,” assistant U.S. attorneys James McMahon and Jonathan E. Green said in their May 2 letter.
Keith Geller, another A.B. Watley day trader, was fined $1,000 for his role in the scheme in February.
The case is U.S. v. Fellus, 05-426, and the main case is U.S. v. Mahaffy, 05-cr-00613, U.S. District Court, Eastern District of New York (Brooklyn).