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Investigators say that Datek executives pretended to be using the system to make trades for smaller investors with accounts at Datek. In fact, they said, Datek's traders and principals were trading for their own benefit. At one point, regulators say, Datek accounted for about 30 percent of the trading volume on the Nasdaq small-order execution system.

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To hide their involvement, investigators say, Datek executives recruited family members, friends and others to create so-called nominee accounts. Datek also created fictitious books and records and filed false reports with regulators, regulators say.

Later, some Datek executives set up a bank called Raft Investments and used about $50 million to finance some nominee accounts. Former Datek traders have said in interviews that they took out high-interest loans from Raft and that some nominee investors were guaranteed returns in exchange for the use of their names.

Federal investigators say most of Datek's trading profits went to Mr. Citron and Mr. Maschler and that fraudulent bookkeeping was used to transfer about $277 million to shell companies the two controlled. For instance, in 1995 and 1996, Datek sent $200 million to a company controlled by Mr. Citron. Investigators say that Datek fraudulently recorded it as a payment for computer services.

Datek's trading operation was so successful that by the late 1990's, the company had about 200 traders. Around 1997, however, it began transforming itself into an online brokerage firm that could be used by small investors.

Datek Online, as the company became known, helped usher in the era of cheap online trading and the $9.99 Internet trade.

But in 1998, when investigators began looking into accusations of illegal trading practices and money laundering, Datek sold its day-trading unit to Heartland Securities, a company controlled by Mr. Maschler and his son Erik.

Regulators say most of the nominee accounts were transferred to Heartland and the new company continued to engage in illegal trading as late as June 2001.

In a complaint filed yesterday in Federal District Court in Manhattan, regulators accused the former Datek employees of stock or bookkeeping fraud. They included Michael McCarty, 39; Aaron Elbogen, 54, the chief executive before Mr. Citron; and Moishe Zelcer, 56, the former chief compliance officer.

Erik Maschler, 32, who worked at Datek and Heartland; and Joshua M. Levine, 34, a former Datek executive and one of the chief architects of the Island E.C.N., were also accused of stock or bookkeeping fraud. Mr. Maschler has agreed to a $6 million fine and a permanent ban from the securities industry.

Mr. McCarty paid a $1.5 million fine; Mr. Elbogen paid $1.4 million; Mr. Levine, $1 million; and Mr. Zelcer, $150,000. Sheldon Maschler also agreed to pay a $2.3 million fine for improper investments involving a savings and loan.

In addition, Heartland agreed to pay a $7 million fine and be censured by the S.E.C.

Aaron Marcu, a lawyer for Heartland, said in a statement: "Heartland is very pleased to have resolved these issues and put it behind us."

Ted Wells, a lawyer representing Sheldon Maschler, but also the lead negotiator, said in a statement: "All involved are satisfied with the resolution of this case and, most importantly, are pleased to be able to put this matter behind them."