DOJ Closes Its WAMCO Investigation. Ken Leech's Criminal Trial Proceeds.

Since our prior coverage established that Western Asset Management (WAMCO) settled SEC charges on June 4, 2026, for $100 million, the material new development is this: the Department of Justice has formally closed its investigation of the firm itself.

WAMCO disclosed in an SEC filing — reported by Claims Journal, citing Bloomberg News — that "the DOJ has notified Western Asset that it is no longer a subject of its investigation and will take no further action." That is a meaningful distinction. The firm is out. Ken Leech is not.

What the Settlement Actually Covers

The $100 million civil penalty, paid by WAMCO parent Franklin Resources, goes into a Fair Fund and will be distributed to investors the SEC determined were harmed by Leech's alleged conduct. WAMCO settled without admitting wrongdoing, describing the agreement as "a business decision" that lets the firm "avoid the distraction of prolonged litigation," according to its Form 8-K filed June 5 with the SEC.

The SEC found that WAMCO willfully violated Sections 206(2) and 206(4) of the Investment Advisers Act of 1940, failed to implement its own reallocation policies, and failed to reasonably supervise Leech, according to AI-CIO's reporting on the SEC's order. The firm received a cease-and-desist order and a censure in addition to the fine.

None of that is an admission that Leech did anything wrong. The settlement resolves the firm's regulatory exposure, full stop.

The Alleged Mechanics

The underlying allegations against Leech are detailed enough to matter here. According to Sonn Law Group's analysis of SEC filings, Leech allegedly began trading Treasury derivative positions as early as 5:00 a.m. Pacific Time but routinely delayed final allocation decisions until after noon, once settlement pricing was visible. That delay, regulators allege, is what allowed profitable trades to flow into favored portfolios while losing positions landed in disfavored accounts.

The SEC's 2024 complaint, cited by Claims Journal, put the total alleged gain-shifting at more than $600 million redirected to favored clients, with corresponding losses pushed onto others.

Leech pleaded not guilty to DOJ fraud charges filed in December 2024. His representative declined to comment, per Claims Journal.

The Strongest Counter-Argument

A reasonable defense of Leech — and one his legal team will almost certainly press at trial — is that delayed allocations in fixed-income trading are operationally common and do not, by themselves, establish intent to defraud. Large institutional bond desks frequently finalize block-trade allocations hours after execution for legitimate administrative reasons. The prosecution has to prove that the delay was systematic, intentional, and directionally correlated with trade outcomes in a way that cannot be explained by chance or workflow. That is a high evidentiary bar, which is part of why Leech's Kastigar challenge (covered in our earlier reporting this week) could matter: if compelled SEC testimony was used to build the criminal case, some evidence may face suppression fights before the jury ever sees it.

The settlement against the firm proves supervision failures. It does not prove Leech's criminal intent, and the two are legally distinct.

What Harmed Investors Are Watching

For institutional investors sitting on losses from WAMCO portfolios during the alleged scheme's window, the $100 million Fair Fund is the current recovery mechanism. How the SEC distributes those funds — which accounts qualify, what the loss calculation methodology looks like — has not yet been publicly detailed, according to the sources reviewed.

Sonn Law Group frames the settlement as "a detailed roadmap showing how internal controls allegedly failed." The underlying point is accurate: the SEC order's findings about supervision failures are now part of the public record and available to any investor pursuing civil claims.

The DOJ's decision to drop WAMCO as a subject while keeping Leech as a defendant also has a practical implication for Franklin Resources. The parent company's exposure to criminal liability appears closed. Its reputational and asset-management business exposure depends heavily on what a jury decides about its former star co-CIO.

Leech's criminal trial date has not been announced in the sources reviewed as of June 12, 2026. The unresolved Kastigar question — whether prosecutors improperly used testimony Leech gave under a grant of immunity during the SEC's investigation — could delay proceedings further or, if a court rules in Leech's favor, force prosecutors to rebuild their evidentiary case from scratch.