SEC Charges Ponzi Scheme Run out of Frat House

Jun 10, 2019

Former College Student Charged with Running Ponzi Scheme out of Frat House On June 3, 2019, the Securities and Exchange Commission announced an emergency action charging a recent college graduate with orchestrating a Ponzi scheme that targeted college students and their families.The SEC’s complaint https://www.sec.gov/litigation/complaints/2019/comp-pr2019-84.pdf alleges that Syed Arham Arbab, 22, ran his scheme out of a fraternity house near the University of Georgia campus. According to the SEC’s complaint, Arbab allegedly offered  hedge fund investments in “Artis Proficio Capital,” which he claimed had generated past annual returns of as much as 56% and for which the investments were guaranteed up to $15,000 in principal. Arbab also allegedly sold guaranteed “bond agreements” with a fixed rate of return. The SEC alleges that at least eight college students, recent graduates, or their family members invested more than $269,000 in these investments. The SEC’s complaint charges Arbab, Artis Proficio Capital Investments LLC, and Artis Proficio Capital Management LLC, with violating the antifraud provisions of the federal securities laws. According to the SEC’s complaint, there was no hedge fund at all, and Arbab created fake performance returns which he used to sell the fund to investors. Instead of investing the money in the hedge fund , Arbab allegedly invested the funds in his personal bank and brokerage accounts, which he used for his own benefit for shopping, entertainment and  travel to Las Vegas. As is the case with most Ponzi schemes, Arbab also allegedly used portions of new investor money to pay earlier investors who had asked for their money back. The SEC alleges that Arbab even instructed some new investors to send their money – unknowingly – to earlier investors through payment apps such as Venmo, Zelle, and Cash App, by representing that these payees were either a “partner” or “manager” in the fund. According to Richard R. Best of the Atlanta office of the SEC “[w]e allege that Mr. Arbab used his college affiliations to operate a Ponzi scheme that drained valuable resources from current and former students. This is a reminder that investors of all ages and experience levels—whether long-time investors or recent graduates investing funds from their first few paychecks—should carefully research investment opportunities and the people offering them.” Investors of all ages can fall victim to a Ponzi scheme, especially in situations where they know the perpetrator through a club or other social group, such as the fraternity in this case. If you or someone you know is a victim of a Ponzi scheme or other investment scam, call us today for a free consultation. Former Wall Street Attorney Melanie S. Cherdack represents investors in the United States and the Caribbean in claims against brokers and brokerage firms for wrongdoing. If and have experienced investment losses, please call us at 888-768-2499 or complete our contact form for a free consultation.

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Signs You May Be A Ponzi Scheme Victim

Apr 11, 2019

The Securities and Exchange Commission (“SEC”) has set out the warning signs or red flags that should alert investors that an investment might be a Ponzi Scheme. Many Ponzi schemes share common characteristics. Look for these warning signs: High investment returns with little or no risk. Every investment carries some degree of risk, and investments yielding higher returns typically involve more risk. Be highly suspicious of any “guaranteed” investment opportunity. Overly consistent returns. Investment values tend to go up and down over time, especially those offering potentially high returns. Be suspect of an investment that continues to generate regular, positive returns regardless of overall market conditions. Unregistered investments. Ponzi schemes typically involve investments that have not been registered with the SEC or with state regulators. Registration is important because it provides investors with access to key information about the company’s management, products, services, and finances. Unlicensed sellers. Federal and state securities laws require investment professionals and their firms to be licensed or registered. Most Ponzi schemes involve unlicensed individuals or unregistered firms. Secretive and/or complex strategies. Avoiding investments you do not understand, or for which you cannot get complete information, is a good rule of thumb. Issues with paperwork. Do not accept excuses regarding why you cannot review information about an investment in writing. Also, account statement errors and inconsistencies may be signs that funds are not being invested as promised. Difficulty receiving payments. Be suspicious if you do not receive a payment or have difficulty cashing out your investment. Keep in mind that Ponzi scheme promoters routinely encourage participants to “roll over” investments and sometimes promise returns offering even higher returns on the amount rolled over. For more details, please visit the SEC website.  These are the SEC’s suggested steps to avoid Ponzi schemes and other investment frauds. Below are some basic questions you should always ask before you commit your hard-earned money to an investment. Is the seller licensed? Is the investment registered? How do the risks compare with the potential rewards? Do I understand the investment? Where do I turn for help? If you do not understand an investment, its features, risks and/or the seller or investment is not registered, these are reasons to not buy the investment. Sometimes, a multi-level marketing scheme is in actuality a Ponzi scheme. As explained by the SEC, Pyramid schemes masquerading as multi-level marketing (“MLM”) programs often violate the federal securities laws, such as laws prohibiting fraud and requiring the registration of securities offerings and broker-dealers. In a pyramid scheme, money from new participants is used to pay recruiting commissions (that may take any form, including the form of securities) to earlier participants just like how, in classic Ponzi schemes, money from new investors is used to pay fake “profits” to earlier investors. Recently, the SEC has sued the alleged operators of large-scale pyramid schemes for violating the federal securities laws through the guise of MLM programs. When considering joining an MLM program, the SEC has warned investors to beware of these hallmarks of a pyramid scheme: No genuine product or service. MLM programs involve selling a genuine product or service […]

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