Securities Law Prof Blog

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

Tuesday, January 29, 2013

SEC Charges Texas Trader with Affinity Fraud Aimed at Lebanese-Druze Communities

The SEC charged Firas Hamdan, a day trader in Sugar Land, Texas, with "affinity fraud."  According to the SEC, Hamdan targeted fellow members of the Houston-area Lebanese and Druze communities in his supposed high-frequency trading program and provided them falsified brokerage records that drastically overstated assets and hid his massive trading losses.

The SEC alleges that Hamdan raised more than $6 million during a five-year period from at least 33 investors. Hamdan told prospective investors that he would pool their investments with his own money and conduct high-frequency trading using a supposed proprietary trading algorithm. Hamdan promised annual returns of 30 percent and assured investors that his program was safe and proven when in reality it generated $1.5 million in losses. The SEC is seeking an emergency court order to halt the scheme and freeze Hamdan’s assets and those of his firm, FAH Capital Partners.

The complaint seeks various relief including a temporary restraining order, preliminary and permanent injunctions, disgorgement of ill-gotten gains with prejudgment interest, and financial penalties.

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