Fund scandal clips JB Oxford

As the summer heat hit 90 degrees, FBI agents stormed the Beverly Hills, Calif., offices of JB Oxford, a small brokerage that was under investigation for its ties to Irving Kott, a Canadian with a long history of securities fraud problems.

According to former employees who were there at the time, some JB Oxford workers thought it was a joke. But stern agents flashed their badges and drilled them with questions. They demanded trading records and address books. They hauled away boxes of files and computers.

For some, the government raid in August 1997 typifies JB Oxford's legal troubles over the past decade. Although the firm has never been charged with a crime, federal investigators have scrutinized the brokerage, and irate investors have accused it of securities fraud. In the 1990s, JB Oxford cleared stock trades for some of the most notorious brokerages on Wall Street, according to court filings, regulators and prosecutors. Last year, JB Oxford was ordered to pay $3 million to investors after a judge found it liable for another brokerage's fraudulent conduct.

New York State Attorney General Eliot Spitzer charged, in a complaint filed in September, that hedge fund Canary Capital ... // 91% Remaining