Former Western Asset Management Co-CIO Charged with Fraud for Cherry-picking Trades
From the desk of Jim Eccleston at Eccleston Law
The SEC recently charged Ken Leech, former Co-CIO of Western Asset Management, with fraud. According to Pensions & Investments, the allegations involve "cherry-picking" trades- a scheme where favorable trades were selectively allocated to certain portfolios, leaving other portfolios with less desirable outcomes.
The SEC's complaint alleges that, from January 2021 to October 2023, Leech delayed trade allocation until later in the trading day. This delay reportedly allowed him to direct profitable first-day trades—amounting to hundreds of millions in gains—to favored portfolios, some of which personally benefited Leech. Meanwhile, portfolios deemed less favorable were left with trades that resulted in net losses.
“This alleged behavior is an egregious abuse of power,” stated Andrew Dean, co-chief of the SEC’s Asset Management Unit. Dean emphasized that Leech’s alleged actions provided him with both personal and professional advantages through the manipulation of trade allocations.
In a parallel action, the U.S. Attorney’s Office for the Southern District of New York also brought charges against Leech.
Leech’s attorney, Jonathan S. Sack of Morvillo Abramowitz, defended him by citing his nearly 50-year spotless career in trading and portfolio management. Sack argued that the allegations fail to consider significant factors, such as differences between fixed-income strategies and the limited relevance of first-day performance to these strategies. He asserted that Leech did not personally benefit from the alleged misconduct and vowed a vigorous defense.
Eccleston Law LLC represents investors and financial advisors nationwide in securities, employment, transition, regulatory, and disciplinary matters.
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