Investors Accuse Jefferies and Pershing of Enabling a Large South American Fraud

what happened

According to Barron's, a group of 20 investors says it fell victim to a large investment fraud and has filed an arbitration claim against brokers Jefferies and Pershing. The claimants argue the firms did not take adequate steps to protect them from Uruguayan broker Sara Goldring, whom they say caused about $16 million in losses. Goldring controlled two Uruguayan brokerage firms, CVM and United Brokers. The case is being heard in an arbitration forum run by FINRA, the industry's self-regulatory body.

The claim alleges that Jefferies and Pershing gave Goldring and her firm broad access to manage client money, and that the activity included churning, cherry-picking and altered risk profiles. A spokeswoman for BNY, Pershing's parent, acknowledged the claim but said the firm had not yet received the filing. A Jefferies spokesman declined to comment. Goldring recently pleaded guilty to misappropriation in Uruguay and received a two-year probation sentence.

why it matters

For markets, the story matters mainly as an example of legal risk for brokers and clearing firms that serve foreign clients through intermediaries. The outcome could influence how brokers vet client accounts and risk profiles, but the episode involves a limited group of participants and does not look like a systemic event.

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