Axos Clearing LLC Ordered To Repay $40.7M Over Worden Capital’s Misappropriations

Axos Clearing LLC (CRD# 117176/SEC# 8-53595) has been ordered to pay more than $40.7 million to over 100 claimants after ignoring the signs that the now-defunct Worden Capital Management LLC was misappropriating client funds prior to its expulsion from FINRA in 2021.

In a FINRA arbitration hearing, Axos Clearing was found to have ignored Worden Capital’s use of investor monies as a “slush fund” while the company actively engaged in extensive churning, unauthorized trading, and unsuitable investment on behalf of its customers. As the clearinghouse that facilitated Worden’s finances, Axos ignored the red flags and “turned a blind eye” while Worden paid the firm millions in clearing and commission fees.

The recent FINRA arbitration panel awarded multiple claimants over $28.3 million in compensatory damages, over $12.2 million in attorney fees, nearly $73,000 in costs and an $800 filing fee reimbursement.

In the complaint, the claimants alleged that Axos ignored Worden as it treated their accounts “as personal slush funds, engaging in egregiously unsuitable and excessive trading and churning,” The company netted over $16 million dollars in commissions and fees while the claimants lost more than $12 million. The claimants’ causes of action included fraud, churning, unauthorized trading, excessive trading/commissions, breach of fiduciary duty, unsuitability, breach of contract, negligence and unjust enrichment.

Axos has denied the allegations, as did Worden Capital, its owner Jamie Worden, who were third-party respondents in the arbitration. Counsel for Axos has filed an appeal to vacate the award, claiming that it contains “fatal errors.”

What Is Axos Clearing, LLC?

Axos is a clearinghouse that handles payments for broker dealers as well as independent and hybrid Registered Investment Advisor (RIA) firms. The firm processes stock transactions, safely holds assets and manages retirement and brokerage accounts. It also offers technological solutions to its clients such as APIs (Application Programming Interface, protocols that allow different software apps to communicate), back-office support, and exclusive software such as Axos Professional Workstation.

Because Axos handled Worden’s financial transactions, the firm could see how they handled everything, including witness their questionable activity, but still did nothing. Instead, Axos collected their fees and allowed Worden to continue.

Recent published reports indicate that Axos Clearing and its business divisions oversee approximately $44.0 billion in assets under custody and/or administration. The firm is registered as a broker-dealer with the SEC. Axos is also a member of both FINRA (Financial Industry Regulatory Authority) and SIPC (Securities Investor Protection Corporation), according to its website.

Because Axos Clearing is closely affiliated with the broker-dealers it works with, the company has also experienced scrutiny and been the subject of arbitration because of it’s clients’ activities.

Silver Law Group’s managing partner Scott Silver told investmentnews.com “At the end of the day Axos served as the clearing firm for a notorious Wall Street boiler room…Axos had full transparency into Worden’s business.”

Was Axos Clearing, LLC Part Of Your Worden Investment Agreement? 

Silver Law Group represents investors in securities and investment fraud cases. Our lawyers are admitted to practice in New York and Florida and represent investors nationwide to help recover investment losses due to stockbroker misconduct. If you have any questions about how your account has been handled, call to speak with an experienced securities attorney. Most cases are handled on a contingent fee basis, meaning that you won’t owe us until we recover your money for you. Contact us today at (800) 975-4345 and let us know how we can help.