The illegal scheme, which was said to have carried out by a former senior derivatives trader at the bank and two senior executive officers of Optionable, was devised in order to inflate BMO's publically reported financial results.
According to the Securities and Exchange Commission (SEC), David Lee, the ex-managing director of BMO's Commodity Derivatives Group, overvalued the bank's portfolio of natural gas options by mismarking trading positions for which market prices were unavailable.
After the scheme was unearthed, BMO changed its results by reducing net income for the first quarter of last year by around C$237 million ($192 million).
Linda Thomsen, director of the SEC's Division of Enforcement, said: "As alleged in our complaint, these defendants engaged in an elaborate scheme to overvalue illiquid assets held on the books of a publicly traded bank."
Founded in 1817, BMO is a financial services provider with operations across Canada and the US.