SEC: Former Reading Broker Defrauded 9/11 Widow, Disabled Daughter

A former Reading stockbroker defrauded a September 11th widow and her children—including a disabled daughter—for around $2 million from 2008 through 2010, according to a civil suit recently filed by the Securities Exchange Commission.

The commission accused James J. Konaxis, a former broker with Reading-based , of excessively trading the customer’s investments to generate commissions for himself.

Over the course of two years, the filing said (see gallery), Konaxis reduced his client’s investments from $3.7 million to $1.6 million while he collected $550,000 in fees. That sum, the commission said, made up three-quarters of his Sentinel income.

The filing said that the customer originally invested the money, awarded to her from the September 11th Victims Compensation Fund, in a series of accounts for her and her daughters. Her husband, a Naval officer, died in the attacks on the Pentagon, the filing said.

It also said the client specified that she wanted each of the accounts to be managed for long-term growth with a moderate tolerance for risk.

As the accounts lost money, the filing said, Konaxis assured the client that she was seeing the same swings in the market that were impacting all investors. Meanwhile, he traded her investment at a high rate in penny stocks.

According to the filing, Sentinel terminated Konaxis in May of 2010.

The company, when reached for comment Friday, issued the following statement:

“Sentinel Securities, Inc. can confirm that in its settlement with the client that it provided full restitution of all losses, with interest. We are satisfied that we reached this swift resolution with the client and believe that we have met the highest standards in the industry with our settlement.”

According to a from the SEC, Konaxis agreed to be barred from the offering of any penny stocks, but the commission seeks to further penalize him.