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Tag: day-trading scams

  • BULLETIN: Now, An Affinity-Fraud Scheme Targeting Lebanese And Druze Communities, SEC Says; Agency Seeks Asset Freeze Against Firas Hamdan And FAH Capital Partners

    From an SEC evidence exhibit.
    From an SEC evidence exhibit.

    BULLETIN: The SEC has gone to federal court in Houston, alleging that Firas Hamdan was conducting an affinity-fraud scheme targeted at the Lebanese and Druze communities. The agency is seeking an asset freeze against Hamdan and his unregistered company, FAH Capital Partners Inc. The scheme is alleged to have gathered about $6 million over five years.

    “Hamdan’s affinity scam preyed upon people’s tendency to trust those who share common backgrounds and beliefs,” said David R. Woodcock, director of the SEC’s Fort Worth Regional Office. “Hamdan raised money by creating the aura of a successful day trader among friends and family in his community, and he continued to mislead them and hide the truth while trading losses mounted.”

    Hamdan is 49. The SEC says he has an address in Houston and previously used an address in Sugar Land.

    “Hamdan is well-known in the Houston-area Lebanese and Druze communities and has enjoyed a reputation as a successful day trader,” the SEC said in its complaint.  “He is also a former treasurer of the Houston branch of the American Druze Society (‘ADS’), a non-profit cultural organization to which many Houston-area members of the Druze religion belong.”

    Falsified records helped drive the scam, the SEC said.

    As has been the case in other scams, Hamdam allegedly claimed he used a “proprietary trading algorithm.”

    “Hamdan explained to investors that his algorithm was ‘plugged into’ his trading account at TD Ameritrade to further minimize investor loss,” the SEC charged. “Hamdan promised investors that, as a result of this algorithm, he could guarantee the fixed monthly return based on the amount they invested with him.”

    As has been the case with other scams, Hamdan also talked about “promissory notes.”

    “Although the precise terms of the notes appear to vary among investors, the notes generally provide for returns of approximately 30% per year,” the SEC charged.

    Read SEC Investor Alert on affinity fraud.

    A snippet (italics added):

    Fraudsters who carry out affinity scams frequently are (or pretend to be) members of the group they are trying to defraud. The group could be a religious group, such as a particular denomination or church. It could be an ethnic group or an immigrant community. It could be a racial minority. It could be members of a particular workforce – even members of the military have been targets of these frauds. Fraudsters target any group they think they can convince to trust them with the group members’ hard-earned savings.

    At its core, affinity fraud exploits the trust and friendship that exist in groups of people who have something in common. Fraudsters use a number of methods to get access to the group. A common way is by enlisting respected leaders from within the group to spread the word about the scheme . . .

    Read the SEC complaint against Hamdan.

     

  • BULLETIN: SEC Files Emergency Action In California To Halt Alleged Day-Trading Scheme Targeting Senior Citizens; Assets Of Robert C. Butler Frozen After ‘Hedge Fund’ That Purported To Have $8.9 Million Had Only $22, Agency Says

    BULLETIN: A man running a day-trading and hedge-fund scheme lied about being a graduate of the Massachusetts Institute of Technology (MIT) and was ripping off senior citizens in the area of Indio, Calif., by dazzling them with technology and high-sounding company names, the SEC said in an emergency court filing.

    At least 17 investors were defrauded, the SEC said.

    Robert C. Butler of Bermuda Dunes, Calif., has been charged with fraud. U.S. District Judge Margaret Morrow of the Central District of California froze his assets after the SEC claimed a hedge fund purported to contain $8.9 million contained only $22.

    Butler, 44, also did not disclose to investors that he filed for bankruptcy in 1998, prior to hatching the day-trading scheme. Even as his scheme was collapsing and investors were not receiving their funds, Butler was raising new money, the SEC charged.

    The scheme raised at least $3.3 million by promising returns of up to 10 percent a month, the SEC charged. The fraud operated through purported funds titled the Butler Private Investment Fund, the BTl Fund and something called Hawk Performance Thrust Vector Application.

    Butler accessed some of the investors’ cash at casinos, the SEC charged, alleging that Butler received “leads” from his father-in-law, who lives in the same “retirement community” as “several” of Butler’s victims. The agency did not name the father-in-law, who has not been charged.

    And Butler dazzled prospects with talk about his purported “proprietary trading program” and tours of his at-home trading center that featured “multiple computer monitors,” the SEC said.

    Some “notes” Butler issued to investors suggested they would receive a “guaranteed” return of 8 percent, but Butler “orally represents that that is the minimum return and that they can expect as much as 10% monthly returns,” the SEC charged.

    “Butler never earned these exorbitant returns,” the SEC charged. “To the contrary, he continually loses money through his securities trading. Butler’s short-term trades and options investments are largely unsuccessful. Butler lost money in 24 of the 27 months between January 2009 and March 2011. Between January 1, 2009 and March 31, 2011, Butler’s securities trading lost approximately $1.9 million.”

    Part of the scheme traded on Butler’s purported academic credentials earned at MIT, the SEC said.

    But Butler “neither attended nor graduated from MIT,” the SEC said.

    Read the SEC’s emergency complaint.