SEC brings fraud charges against trader for “free riding”
Vu Anh Nguyen allegedly orchestrated a scheme to trade securities without sufficient funds, a practice known as “free riding”.
The United States Securities and Exchange Commission (SEC) has brought fraud charges against Arizona resident Vu Anh Nguyen for orchestrating a scheme to trade securities without sufficient funds, a practice known as “free riding”.
The illicit scheme is estimated to have caused over $1 million in total losses for eight brokerage firms. The SEC also charged Arizona residents Adam Michael Reed and Anthony Xavier Moya with aiding and abetting the scheme.
According to the SEC’s complaint, in 2018 and 2019, Nguyen opened brokerage accounts and requested electronic fund transfers from bank accounts, knowing that the accounts had insufficient funds to cover the transfers. The complaint also alleges that Nguyen immediately began trading securities in the accounts.
Nguyen was able to transfer $61,888 out of the accounts before the accounts were frozen by the brokerage firms, reaping the benefits of profits earned due to trading, while leaving the brokerage firms to settle the trades at a significant loss.
The complaint further alleges that Reed and Moya provided Nguyen access to brokerage accounts they opened, knowing that Nguyen was going to use the accounts to further this fraudulent scheme. In total, Nguyen allegedly engaged in free-riding in 26 accounts at eight brokerage firms, making $4.7 million in bogus transfers and purchasing over $16 million in securities.
The SEC’s complaint charges Nguyen with violating, and Reed and Moya with aiding and abetting Nguyen’s violations of, the antifraud provisions of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and seeks injunctions and civil penalties against all defendants and disgorgement with prejudgment interest against Nguyen and Reed.
Nguyen and Moya, without admitting or denying the allegations in the SEC’s complaint, consented to the entry of judgments enjoining them from future violations of the charged provisions and prohibiting them from opening brokerage accounts without first providing the broker-dealer with a copy of the complaint and judgment in this matter. Nguyen also agreed to be enjoined from trading in securities in any brokerage account that does not have settled cash to pay for the trade.
