SEC expenses dealer with fraudulent “free-riding” scheme

The Securities and Alternate Fee (SEC) has filed expenses in opposition to Andrew M. Komarow of Avon, Connecticut.

The SEC’s criticism expenses Komarow with conducting a fraudulent “free-riding” scheme by which he tried to revenue by buying and promoting securities with out paying for them.

The criticism alleges that, from October 2022 to January 2023, Komarow engaged in a sample of creating unfunded digital transfers of cash from varied financial institution accounts to at the very least ten accounts at 4 broker-dealers, realizing that he didn’t have ample funds within the financial institution accounts to cowl the transfers.

The criticism additional alleges that Komarow instantly started buying and selling securities within the brokerage accounts utilizing funds that the brokerage companies made quickly out there whereas the fraudulent transfers had been pending. When these transfers didn’t materialize, the brokerage companies had been left with buying and selling losses.

In accordance with the criticism, Komarow made false deposits totaling over $6.9 million. Komarow’s buying and selling was largely unprofitable: he eliminated at the very least $615,031 from the accounts however left the brokerage companies with losses totaling over $3 million, avoiding having to make good the losses himself.

Komarow, with out admitting or denying the allegations within the SEC’s criticism, consented to the entry of a partial judgment, which completely enjoins him from violating the antifraud provisions of Part 10(b) of the Securities Alternate Act of 1934 and Rule 10b-5 thereunder.

The partial judgment additionally bars Komarow from opening any brokerage account with out first offering the brokerage agency with a duplicate of the SEC’s criticism and ultimate judgment on this matter and prohibits him from putting any securities trades with out having settled money within the account equal to or better than the quantity of the trades.

The partial judgment leaves to a later resolution by the courtroom whether or not to order disgorgement of Komarow’s ill-gotten good points plus prejudgment curiosity and a civil financial penalty. The partial judgment additionally orders that Komarow shall be barred from serving as an officer or director of any public firm for a time period to be decided later by the courtroom.

Komarow’s settlement provide is topic to approval by the courtroom.