Bert Fingerhut, a former Wall Street broker, is going to prison for two year for illegally obtaining stock in 65 public offerings by banks and profiting over $11 million from it. One such instance related to stock in Bank Mutual, from which Fingerhut allegedly profited $700,000.

The Securities and Exchange Commission says Fingerhut engaged in his scheme for 10 years. When a bank converts from a mutual (owned by those who have money deposited there) to stock ownership, the depositors of the bank have the first chance at buying stock before it is offered to other investors.

Fingerhut essentially “cut in line” in front of those depositors to buy stock that netted him huge profits. He did so by having friends and family members become depositors of banks which seemed likely to conver to public stock companies. Fingerhut then had them purchase stock with his money, while signing documents which falsely said they were NOT using anyone else’s money and would not be transferring ownership or profits.

His acts hurt the real depositors of banks, because there usually is not enough stock available to even meet the demand of the depositors (who should get first chance) and they are therefore limited in how much they can buy.

When banks convert from mutuals to stock ownership, there is typically a quick initial run-up in price after the stock hits the open market. This is what made it so lucrative for Fingerhut to engage in such a scheme.

Fingerhut has already agreed to forfeit his $11 million of ill-gotten gains.