Local buyers to reopen Madoff brokerage in NYC
Surge Trading awaits regulatory board approval
The local buyers of convicted Ponzi artist Bernard Madoff’s former brokerage will reopen the business as Surge Trading Inc., in the same midtown Manhattan office tower where Madoff operated his onetime financial empire.
The principals of Surge completed their purchase of the brokerage yesterday, with proceeds of up to $25.5 million going to Madoff’s victims. The firm is still awaiting approval by the Financial Industry Regulatory Authority, but executives hope to be placing stock trades by August.
The brokerage business was not part of Madoff’s fraud scheme, regulators have said. The thousands of customers who lost billions of dollars to Madoff did so by placing money with a separate investment arm he ran.
Investigators have determined that Madoff did not actually invest clients’ money for at least 13 years - and possibly never did.
Among the big industry names behind Surge Trading are Frank J. Petrilli, the former head of brokerage TD Waterhouse, who will be the new company’s chief executive, and Robert P. Mazzarella, a former president of Fidelity Brokerage Services in Boston, who will be nonexecutive chairman, as previously reported by the Globe. They said they hope to pick up where the old firm left off and to attract new clients among hedge funds and investment managers.
“Like everybody, we have to prove ourselves,’’ Mazzarella said.
He believes the market’s need for the trading capacity Surge can provide will overcome any taint from Madoff.
Surge will rehire a number of former Madoff brokerage employees - perhaps as many as 50, Petrilli said. He said the company decided to stay at the trading floor in the Third Avenue location, called the Lipstick Building (for its shape), because the technology and infrastructure are still there.
Mazzarella said the new owners are carefully vetting the people they rehire. “The folks that are working there by and large are good people. They were just caught in something that they were totally unaware of,’’ he said.
The firm, which will make markets in Nasdaq- and New York Stock Exchange-listed stocks, hopes to compete against the likes of Knight Securities and Citadel Securities. It will also probably compete for brokers’ business among electronic trading networks and so-called dark pools, where trades are matched out of public view.
Surge’s investors include Darin Oliver of Medfield and venture capitalists at Fairhaven Capital Partners of Cambridge. The group agreed to pay $1 million in cash up front and as much as $24.5 million more by December 2013, based on the business’s revenues, according to Stephen J. Sussman, the firm’s financial officer at Regulatory Compliance in Londonderry, N.H.
Beth Healy can be reached at bhealy@globe.com. 
