Former student at University of Georgia replies to SEC allegations in fraud case

Maria Nikolova

Syed Arbab argues that the Securities and Exchange Commission (SEC) has failed to state a claim against him.

About two months after the United States Securities and Exchange Commission (SEC) launched an action against Syed Arham Arbab, a former student at the University of Georgia, and two entities under his operation and control – Artis Proficio Capital Investments, LLC (APCI) and Artis Proficio Capital Management, LLC (APCM), the defendant has replied to the SEC’s complaint.

The defendant’s answer, filed with United States District Court of the Middle District of Georgia on July 31, 2019 and seen by FinanceFeeds, makes it clear that Arbab denies pretty much all allegations made by the SEC in its complaint.

For instance, the defendants deny the allegations that they were a part of an ongoing Ponzi scheme and offering fraud. The defendants also deny that, between at least May 2018 and as recently as May 17, 2019, Arbab, acting individually or through APCI and APCM, offered and sold investments in a purported hedge fund, called Artis Proficio Capital and that Arbab promised very high rates of return, and sent investors account updates purporting to substantiate those claims. Arbab also offered and sold certain “bond agreements,” which function like promissory notes.

Further the defendants deny allegations that Arbab’s investments were fraudulent and that no hedge fund existed, the claimed performance returns were fictitious, and Arbab never invested the funds as he represented.

In terms of affirmative defenses, Arbab’s reply says the following:

  • Plaintiff has failed to state a claim upon which relief may be granted.
  • Plaintiff has failed to bring the within actions within the time required by each such action.
  • Plaintiff has failed to join certain indispensable parties.

The defendants request that all relief requested by the SEC be denied and that each and every cause of action alleged be dismissed with prejudice.

According to the SEC’s complaint, Syed Arham Arbab, age 22 and a resident of Athens, Georgia, described himself as the Fund’s “Partner” and “Chief Investment and Financial Officer.” Arbab is not registered with the Commission in any capacity.

In May 2018, Arbab began soliciting investors for investments in the Fund, which he told investors he managed and controlled. He represented to investors that he had already finished his undergraduate degree and was working on a master’s degree in business administration (MBA) from UGA. In reality, Arbab did not receive an undergraduate degree from UGA until May 2019, which was in cellular biology and genetics. He has never been enrolled in UGA’s MBA program.

In text messages and emails to investors and potential investors, Arbab made multiple representations about the Fund, including:

  • his “firm” was “different because we target young investors/college kids;”
  • money invested in the Fund was “GUARANTEED and backed up to 15,000$;”
  • the Fund had earned annual returns that he variously described as ranging between 22 to 56 percent;
  • the Fund would have lower costs than most other hedge funds because Arbab would not take any percentage of the initial investment and would only take “15% off [an investor’s] capital gains after calculating taxes;”
  • investors could withdraw their money with two weeks advance notice.

In reality, the Fund never existed, and, upon information and belief, there is no brokerage account existing in the name of the Fund, APCI, or APCM.

The SEC has found that, from May 2018, when Arbab started soliciting investments for the Fund, and January 2019, Arbab deposited all or most of the investor funds he received for the Fund and for bond agreements into his personal bank account or his personal brokerage accounts. From his personal bank account, Arbab paid various living expenses, including more than $10,000 in cash withdrawals and more than $5,000 in hotel and nightclub expenses during a December 2018 gambling trip with friends in and around Las Vegas, Nevada.

The SEC is seeking, inter alia, a civil monetary penalty and disgorgement.

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