U.S. regulators have laid criminal charges and begun a civil lawsuit against a former executive who worked for the Canadian Imperial Bank of Commerce.

Paul Flynn, 46, faces criminal charges laid by New York Attorney General Eliot Spitzer and a civil lawsuit begun by the Securities and Exchange Commission.

He was managing director of equity investments at a CIBC unit called Canadian Imperial Holdings Inc., and made US$1 million from a “late-trading” scheme, Spitzer alleged.

Flynn faces five felony charges under New York state law for his role providing loans to hedge funds which used the money to finance late trading.

The CIBC’s hedge fund clients were able to make unlawful trades up to midnight, “thus illegally profiting from market shaping developments that occur after the close of the market,” Spitzer’s office said in a news release.

The trades were made at the day’s closing price using an electronic trading system run by Security Trust Co. N.A.

While the hedge funds traded at the closing price, other investors would have to wait until the next day to trade on the same information.

The scheme is party outlined in a memo Flynn wrote and was quoted by Spitzer and the SEC. It also said Security Trust used different strategies to hide the trading from the mutual funds.

The SEC civil suit against Flynn is based on the same allegations as Spitzer’s case.

The SEC said Flynn “knew or was reckless in not knowing” that loans he arranged for hedge funds were used to finance “late trading and deceptive market timing” trades in mutual funds between 2001 and 2003.

The SEC said Flynn “substantially assisted” violations of the Securities Act. If an administrative law judge agrees with the allegations, Flynn could be barred from the industry, forced to repay any gains made, told to cease-and-desist or face other civil penalties.

If found guilty on the most serious New York charge, Flynn could be jailed for 25 years.

Flynn and Jeffrey Haas, another CIBC hedge-fund financeer, were let go in December, TheStreet.com said.

Spitzer’s release said the bank had worked with investigators.