Fraudulent schemes often key to inducing investors to place their trust in the fraudster. While it often seems simple to avoid the would be fraudster when standing back and reading court pleadings and other documents about a fraud, it clearly is not – even for market professionals. For example, the typical offering scheme centers on investors placing their trust in the person or persons soliciting them to invest, a question often resolved based on the attractiveness of the inducements.
Free-riding schemes would seem to be more difficult to execute because the target is typically an experienced market professional convinced to make his or her firm’s credit available to create the opportunity for a “free ride” through a series of quick initial trades. Yet both types of schemes are frequently effective, a point well illustrated by the lead defendant in SEC v. Arbab, Civil Action No. 1:22-mi-99999 (N.D. Ga. Filed October 31, 2022) who operated a free riding scheme just after completing a Ponzi scheme and as the Commission filed its first action against him.
The complaint in the most recent enforcement action against Mr. Arbab names as defendants: Syed Arham Arbab, a graduate of Georgia State University who is currently serving a 60 month in federal prison for securities fraud; Tomas Javier Jimenez, a friend of Defedant Arbab who at the time here was a cook; Blake Douglas McKinney, also a friend of Mr. Arbab who is now pursuing a degree at the University of…
