Six individuals, including a high-flying federal inmate of HBO fame who is already serving time for running a Ponzi scheme out of his University of Georgia fraternity house, were charged today for conducting a scheme that defrauded multiple broker-dealers, the Securities and Exchange Commission announced.
The SEC’s complaint alleges that from May 2019 to early January 2021 Syed Arham Arbab, 25, and five others, made more than $2 million in “bogus deposits from empty or underfunded bank accounts” into various brokerage accounts to deceive broker-dealers into providing instant deposit credit they used to engage in unfunded online securities trading.
The SEC complaint alleges that Arbab and his fellow participants, which included his high school and college friends and a relative, allegedly received some $2 million in instant credit they used to make unfunded online trades, which caused affected broker-dealers to lose at least $146,660 , the SEC said.
“Arbab was the architect of this scheme,” the SEC said in its complaint. “In addition to engaging in his own free-riding, he also solicited dozens of individuals through group text messages and social media to engage in this fraud. While many rejected Arbab’s solicitations, others agreed to free-ride with him and thereafter either allowed him to free-ride in their accounts, or were coached by him to free-ride on their own.”
Arbab allegedly conducted this scheme at two unnamed broker-dealers just before starting his five-year prison sentence in January, 2021 for running a Ponzi scheme from his fraternity house near the University of Georgia. He pleaded guilty in a parallel criminal case brought by the US Attorney’s Office for the Middle District of Georgia and was ordered to pay $509,032.12 in restitution to his victims.
Episode 7 of “Generation Hustle” on HBO Max followed the story of Arbab, billed as the University of Georgia’s very own “Wolf of Wall Street,” as he flaunted a lavish lifestyle, pricey cars and cocaine use. It also depicted his creation of what he said was a hedge fund out of his fraternity house, quickly raising over $1 million in investments from 117 fellow students, family, and alumni between May 2018 and May 2019.
When Arbab’s so-called entities—Artise Proficio Capital Management and Artis Proficio Capital Investments—began to lose money, he turned to desperate measures, including drug trafficking, and gambling investors’ money in Las Vegas, the HBO series depicts.
“Securities traders who seek to cheat the market with fake deposits of money to make unfunded securities transactions will be held accountable for their deception,” Justin C. Jeffries, associate director of Enforcement for the SEC’s Atlanta Regional Office said in a statement about the new charges against Arbab and his co-defendants.
“Freeriding is not a victimless scheme, as broker-dealers form an integral part of the market and are protected from fraud under the federal securities laws,” Jeffers added.
The SEC’s complaint, filed in federal district court in Atlanta, charges Arbab and his five co-defendants—Tomas Javier Jimenez, 24; Blake Douglas McKinney, 26; Mushfiqur Rahman, 21; John Ryan Shows, 25; and William Carl Spagnoli, 24,—with violating certain anti-fraud provisions of the federal securities laws.