Velrox Clearing got fined $1.3M for ignoring marketing manipulations.

Imagine watching your life savings evaporate in an instant. You saw a stock, something cheap with a foreign-sounding name, suddenly skyrocket. It was the talk of online message boards, the “next big thing.” So you bought in, dreaming of a windfall. Then, just as quickly as it climbed, it crashed, leaving you holding the bag with a knot in your stomach. You were played like a damn fiddle. And the company that was supposed to be the market’s security guard? It was looking the other way the entire time.

This isn’t a hypothetical. It’s the fallout from a system that a Miami-based firm, Velox Clearing LLC, was meant to police. Instead, for years, it operated with a compliance program that was, to put it mildly, a catastrophic failure.

Velox provides the essential plumbing for money to move through our markets, offering clearing services that allow foreign financial institutions to trade in the U.S. using something called “omnibus accounts”. Think of Velox as the bouncer at the door of the U.S. stock market. Their job is to check IDs and make sure no one is coming in to start a brawl.

But from January 2019, the bouncer was apparently asleep at the switch. Velox was hired to watch for crooks but failed to build even a basic security system.

While its clients, including one it shared common ownership with, were trading in risky, low-priced securities, Velox’s anti-money laundering (AML) program was a hollowed-out shell. The firm’s own rulebook was a generic, off-the-shelf document that wasn’t tailored to its actual business. It listed potential red flags for market manipulation but gave its employees zero guidance on how to actually find them. It was like giving a firefighter a manual that says “fire is hot” but includes no instructions on how to use a hose.

The consequences were predictable. The firm’s systems were blind to the most blatant signs of market manipulation. We’re talking about schemes with names straight out of a gangster movie: spoofing, layering, marking the close. These tricks are all designed to do one thing: create a fake picture of a stock’s value to lure in unsuspecting investors, only to dump the shares on them at an inflated price.

For example, a foreign client affiliated with Velox, dubbed “Customer A,” repeatedly engaged in textbook manipulative trading. In one instance in 2021, they placed and canceled a flurry of buy orders for a small-cap issuer in just over one second to create phantom demand. Then, minutes later, they dumped a massive number of shares at the newly inflated price. This happened again and again, often in thinly traded stocks for China-based companies that had just gone public.

The most damning part? People inside the system saw what was happening. In 2022, a Velox operations associate flagged trading in three small-cap stocks that reeked of manipulation. He brought it to management.

The firm did nothing. In 2023, their own Chief Compliance Officer raised alarms about a foreign customer trading in suspiciously volatile stocks. Again, nothing. Other brokerage firms that executed trades for Velox saw the red flags and warned them about potential spoofing. Velox didn’t even bother to document an investigation.

This was a systemic breakdown in action. The firm churned through eight different anti-money laundering compliance officers, with no other staff to support the program. These officers were so bogged down with other tasks they couldn’t possibly monitor the flood of trades. One AML officer in 2022 practically begged senior management for more staff and better surveillance tools. The requests were denied.

Meanwhile, the firm’s own CEO and staff were routinely using unapproved apps like WeChat for business, sending messages about wiring funds and placing orders completely off the books, where they couldn’t be tracked or reviewed by regulators. More than 10,000 of these off-channel communications were never preserved.

A Pattern of Harm

The timeline shows a clear pattern of a company being warned, seeing the evidence, and choosing to do nothing.

This story is bigger than Velox. It’s (at its core) about a financial system where the sentinels of the market are incentivized to keep the gates open, not to guard them. Firms like Velox make money on transaction volume. Policing that volume costs money and can mean turning away profitable, high-risk clients. The system relies on these firms to regulate themselves, but when the choice is between protecting Main Street investors and boosting the bottom line, the outcome is all too clear.

Omnibus accounts become the perfect cover, allowing traders from anywhere in the world to manipulate our markets from behind a curtain.

So what happens to the gatekeepers who failed so profoundly? Velox was censured and fined $1.3 million. They don’t have to admit to doing anything wrong. This isn’t their first slap on the wrist, either; it follows a $500,000 fine from Nasdaq for similar failures.

For a firm that provides clearing services to scores of institutions, these fines are little more than the cost of doing business. No individual executives were held accountable. The fine is paid, and the system rolls on.

This is not justice, not by a long shot. Real justice would mean creating a system where this can’t happen again. It would mean regulators demanding full transparency for omnibus accounts.

It would mean fines that are so punitive they can’t be shrugged off as a business expense. And it would mean holding the individuals in the executive suites personally responsible when their firm’s neglect leaves a trail of financial devastation. Until then, the market remains a playground for manipulators, and the bouncers will keep looking the other way.

All factual claims in this article are sourced from the Financial Industry Regulatory Authority (FINRA) Letter of Acceptance, Waiver, and Consent No. 2022077267702.

The FINRA link to that above PDF on this scandal can be found at this following link: https://www.finra.org/sites/default/files/fda_documents/2022077267702%20Velox%20Clearing%20LLC%20%20CRD%20290215%20AWC%20gg%20%282025-1753316402405%29.pdf