Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

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Tuesday, November 2, 2010

SEC CHARGES TRADER IN FRAUDULENT FREE-RIDING SCHEME

The SEC charged a trader with orchestrating and conducting an illegal scheme that defrauded two broker-dealers out of more than $600,000, and netted the trader, alone or with others, over $223,000 in illicit profits.  According to the SEC, Noor Mohammed, acting alone or in conjunction with others, conducted a fraudulent "free-riding" scheme by: (1) using false information to establish margin accounts at the broker-dealers; (ii) funding those accounts with checks that Mohammed knew were not backed by sufficient funds; (iii) executing over 100 trades in the accounts; and (iv) either profiting from the winning trades or abandoning the accounts without paying for the losing trades.

http://lawprofessors.typepad.com/securities/2010/11/sec-charges-trader-in-fraudulent-free-riding-scheme.html

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