Gregg Z. Schonhorn of Short Hills New Jersey is a stockbroker formerly registered with FTN Financial Securities Corp who has been charged by SEC in a Complaint alleging that he engaged in a fraudulent investment scheme. United States Securities and Exchange Commission v. Gregg Z. Schonhorn et al. Civil Action No. 16-cv-9829 (Dec. 21, 2016).
According to the Complaint, Schonhorn’s activities relate to New York State Common Retirement Fund’s Director of Fixed Income – an individual that made demands and ultimately acquired one hundred eighty thousand dollars in improper and undisclosed benefits, travel and entertainment from stockbrokers so that trades of a public pension would be directed to those brokerage firms. The Complaint alleged that commissions totaling several million dollars had been accumulated by stockbrokers who participated in a pay-to-play scheme.
Particularly, Navnoor S. Kang was employed by the New York State Common Retirement Fund pension fund in 2014 to direct the pension’s fixed income unit, wherein nearly fifty billion dollars in New York State Common Retirement Fund’s assets were placed under Kang’s responsibility to be managed. Apparently, while Schonhorn was employed by FTN Financial Securities Corp, he met with Kang once Kang was hired by the pension, wherein valuable items owned by Schonhorn had been solicited and provided to Kang.
The Complaint stated that Schonhorn handed one hundred sixty thousand dollars in benefits to Kang over a two year period, which included lavish dinners, sporting events, concerts, alcohol, cocaine, strip club entertainment and prostitution services. The SEC claims that the New York State Common Retirement Fund was never apprised of this information. In return, the Complaint stated that a substantial amount of New York State Common Retirement Fund’s trading volume had been assigned by Kang to FTN Financial Securities Corp. Apparently, $2,380,000,000.00 worth of fixed income trades had been placed by FTN Financial Securities Corp by March 31, 2016. Schonhorn reportedly earned several hundred thousand dollars each month as a result.
The Complaint alleged that a fraudulent scheme had been effected by Schonhorn in order to conceal the benefits that he provided to Schonhorn. SEC alleged that Schonhorn’s conduct was violative of Securities Exchange Act of 1934, SEC Rule 10b-5(a), 10b-5(c), and Securities Act of 1933 Sections 17(a)(1) as well as 17(a)(2). The Complaint further alleged that by Schonhorn significantly helping Kang conceal those illicit payments, he aided and abetted Kang’s violations of federal securities laws. SEC is seeking, inter alia, that Schonhorn be enjoined from committing future fraudulent acts, and that he be disgorged of illicit gains and ordered to pay civil fines.
Schonhorn was fired by FTN Financial Securities Corp on December 21, 2016, supported by accusations that Schonhorn participated in illegal activities pertaining to undisclosed and inappropriate benefits that were provided to New York State Common Retirement Fund’s portfolio manager in return for trading activities to be directed to the firm.
Financial Industry Regulatory Authority (FINRA) Public Disclosure additionally confirms that on December 20, 2016, Schonhorn pled guilty to criminal charges including: securities fraud; bank fraud; attempt and conspiracy to commit wire fraud; and conspiracy to obstruct justice.
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