A Boston-based financial firm has reached a settlement with Montana regulators where it will pay $1.3 million to victims of a Ponzi scheme allegedly perpetrated by a former employee.

LPL Financial Corporation agreed to pay the amount to Montana investors and an additional fine of $150,000 to the state to resolve claims involving the alleged illegal activity of former LPL agent Donald Chouinard. Chouinard allegedly operated the Ponzi scheme in the Kalispell area of Montana, and was not appropriately supervised by his former employer, according to the state’s department of securities and insurance.

The department is continuing to pursue the case against Chouinard and his companies, DC Wealth Management Inc. and DC Associates, Inc.

As part of the settlement, LPL did not admit or deny any of the allegations, but felt it was in the best interests of its customers to resolve the alleged violations, according to the department.

In September, Montana’s securities department issued a temporary cease and desist order against Chouinard and his two companies, alleging securities fraud and conducting a Ponzi scheme involving Montana and Idaho investors. The investors believed they were participating in a “day-trading” program, when they were actually receiving proceeds taken from money contributed by newer investors.

The department alleged that Chouinard convinced one investor to obtain a $100,000 loan and invest with him because he could guarantee a high return in a month. Chouinard allegedly did not invest the funds, but used $50,000 to pay off a previous investor, deposited $25,000 into his own bank account and gave the remaining $25,000 to his attorney.

Monica Lindeen

Chouinard also allegedly traded in the investors’ accounts without authorization and forged their signatures to authorize certain trades. He also failed to provide the investors with statements or tax documents related to their “day trading” investments, according to the department.

The investors allege Chouinard misrepresented the values of their investments, including one case by as much as 10,000%. Excessive trades also produced thousands of dollars in commissions for Chouinard.

Monica Lindeen, commissioner of the Montana Department of Securities and Insurance, praised LDL for doing right by the injured Montana investors.

“Too many hard working Montanans lost their savings due to the actions of Mr. Chouinard, but today we started the process of recovering those losses,” Lindeen said in a statement. “This settlement is the result of both efficient and effective enforcement work by this agency and a willingness by LPL Financial Corporation to arrive at a solution that addresses the needs of its clients. We are very pleased with this result.”