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U.S. Securities and Exchange Commission

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF WASHINGTON


Securities and Exchange Commission,

Plaintiff,   

v.

SUHEIL M. JUDEH,

Defendant.   


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Case No.

COMPLAINT

Plaintiff Securities and Exchange Commission ("Commission") alleges:

I. SUMMARY OF ALLEGATIONS

1. Defendant Suheil M. Judeh ("Judeh" or "Defendant") is a Seattle, Washington resident who opened a series of brokerage accounts using stolen and false identities and forged checks. Judeh used these accounts to buy and sell securities with himself, through another brokerage account he held in his own name. Judeh structured the trades so that the account in his name consistently made money, while the fake (or "nominee") accounts incurred losses. Because Judeh had opened the nominee accounts using forged checks, the brokerages were ultimately left holding the losses. Judeh's offers to buy and sell securities through the nominee accounts were fraudulent because he never intended to pay for the trading losses he accumulated in those accounts. Moreover, because Judeh's trades were publicly reported, they gave the false appearance of legitimate market activity to other traders in those securities. Judeh's illegal trading scheme, which ran from at least May through June 2002 and March through July 2003, netted profits of approximately $95,000.

2. The Commission brings this action to have Judeh enjoined from future violations of the federal securities laws, and to obtain orders requiring him to disgorge his ill-gotten gains and to pay civil money penalties.

II. JURISDICTION AND VENUE

3. The Commission brings this action pursuant to Section 20(b) of the Securities Act of 1933 ("Securities Act") [15 U.S.C. 77t(b)] and Section 21(d) of the Securities Exchange Act of 1934 ("Exchange Act") [15 U.S.C. 78u(d)].

4. This Court has jurisdiction over this action pursuant to Section 22(a) of the Securities Act [15 U.S.C. 77v(a)] and Sections 21(e) and 27 of the Exchange Act [15 U.S.C. 78u(e) and 78aa]. Defendant, directly or indirectly, has made use of the means and instrumentalities of interstate commerce, or of the mails, in connection with the acts, transactions, practices, and courses of business alleged in this Complaint.

5. Venue in this District is proper pursuant to Section 22(a) of the Securities Act [15 U.S.C. 77v(a)] and Section 27 of the Exchange Act [15 U.S.C. 78aa]. Certain of the transactions, acts, practices, and courses of conduct alleged in this Complaint occurred within the Western District of Washington.

III. THE DEFENDANT

6. Suheil M. Judeh, age 36, resides in Seattle, Washington. In the past, Judeh has been an active trader of stocks for his own account, frequently engaging in short-term trading commonly known as "day-trading."

IV. FACTUAL ALLEGATIONS

A. Judeh Established Multiple Brokerage Accounts Using Stolen and False Identities

7. From May through June 2002 and from March through July 2003, Judeh established multiple accounts at two brokerage firms, E*Trade Securities, LLC ("E*Trade") and Ameritrade, Inc. ("Ameritrade"), using twenty-six identities that were not his own. In some cases, Judeh used identities he stole from other people, who had no knowledge of the accounts; in others, Judeh used false identities he created.

8. Judeh opened each of these nominee accounts by sending account opening forms to the brokerage along with a check to fund trading in the account. He completed the forms using the personal information (name, address, social security number, etc.) of the real or fictitious person whose identity he was using. The checks, which averaged roughly $8,500, contained signatures forged by Judeh and were written on non-existent bank accounts.

9. After receiving the forms and check, the brokerages opened each account for trading. Judeh was thus able to trade in the nominee accounts for several days before the brokerages tried to cash the checks, discovered they were worthless and closed the accounts to trading.

10. After submitting the account opening forms and the check, Judeh on several occasions telephoned the brokerage firms. During these calls, Judeh pretended to be the nominee and attempted to determine whether the account was cleared for trading, so that he could take maximum advantage of his limited trading window.

B. Judeh Profited by Trading With Himself

11. At the time Judeh began opening the nominee accounts, he maintained an account in his own name at Castle Securities Corporation ("Castle"). Judeh's plan was to set up a series of matching trades between the nominee accounts and his own account at Castle, so that the Castle account would generate trading profits, while the nominee accounts incurred losses.

12. Judeh used the Internet to place orders to buy and sell stocks through the nominee accounts and placed contemporaneous matching orders (for the same security, price, and quantity) through his Castle account. He placed the orders during extended-hours trading, i.e., before or after regular market sessions. Because these extended-hours sessions had low trading volume, few other traders were entering orders when Judeh entered his, and his orders were most often executed against each other.

13. In this manner, Judeh bought and sold the same stocks back and forth between the Castle account and the nominee accounts he controlled. Judeh consistently structured his orders so that his Castle account was on the profitable side of the trade, while a nominee account was on the losing side. Because Judeh opened the nominee accounts with worthless checks and under stolen and false identities, E*Trade and Ameritrade ultimately bore the losses in those accounts.

14. Using the techniques just described, Judeh conducted over 100 fraudulent trades through the nominee accounts from May through June 2002 and from March through July 2003, gaining illegal profits of approximately $95,000.

C. Judeh's Conduct Created a False Appearance of Legitimate Trading Activity

15. Judeh's trades were part of a fraudulent scheme and thus did not reflect true demand for the stocks involved. Nonetheless, his trading activity was publicly reported to other market participants, and therefore he created a false appearance of legitimate market activity.

16. Judeh's orders were typically routed to the Island ECN or the Archipelago Exchange ("ARCA-X") for execution. In turn, the orders were publicly displayed through outlets including the NASDAQ workstation and the Island and ARCA-X websites. This allowed other market participants to view them. When the orders were executed, the executions were also publicly displayed on the same outlets.

17. In order to generate his illegal profits, Judeh frequently bought and sold the same stock within minutes, at prices differing by 10% or more. He also frequently traded in quantities that were substantially higher than the prevailing market, and his trading often comprised a substantial portion of all volume in the relevant extended-hours session. Other market participants who viewed these price fluctuations and volumes would have naturally assumed that the activity was driven by genuine demand and supply for the stocks involved. What they actually witnessed, however, was fraudulent trading at contrived prices that had no relation to the true market.

18. As an experienced day-trader, Judeh knew or was reckless in not knowing that other market participants would view his trading without knowing that it was contrived for a fraudulent purpose.

CLAIMS FOR RELIEF

FIRST CLAIM
Fraud in Connection with the Purchase or Sale of Securities
Section 10(b) of the Exchange Act and Rule 10b-5)

19. The Commission realleges and incorporates by reference the allegations contained in Paragraphs 1 through 18.

20. Defendant, by engaging in the conduct described in Paragraphs 1 through 21, directly or indirectly, by the use of the means or instrumentalities of interstate commerce, or of the mails, or the facilities of a national securities exchange, in connection with the purchase or sale of securities, with scienter: (1) employed devices, schemes, or artifices to defraud, (2) made untrue statements of material fact or omitted to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading, and (3) engaged in acts, practices, or courses of business which operated as a fraud or deceit upon other persons.

21. By reason of the foregoing conduct, Defendant violated, and unless permanently enjoined, will continue to violate Section 10(b) of the Exchange Act [15 U.S.C. 78j (b)] and Rule 10b-5 [17 C.F.R. 240.10b-5] promulgated thereunder.

SECOND CLAIM
Fraud in the Offer or Sale of Securities
(Section 17(a) of the Securities Act)

22. The Commission realleges and incorporates by reference the allegations contained in Paragraphs 1 through 18.

23. Defendant, by engaging in the conduct described in Paragraphs 1 through 21, directly or indirectly, in the offer or sale of securities, by the use of means or instrumentalities of transportation or communications in interstate commerce or of the mails: (1) with scienter, employed devices, schemes, or artifices to defraud; (2) obtained money or property by means of untrue statements of material fact or by omitting to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; and (3) engaged in transactions, practices, or courses of business which operated or would operate as a fraud or deceit upon the purchasers.

24. By reason of the foregoing transactions, practices, and courses of business, Defendant violated, and unless permanently enjoined, will continue to violate Section 17(a) of the Securities Act [15 U.S.C. 77q(a)].

PRAYER FOR RELIEF

WHEREFORE, the Commission respectfully requests that this Court:

I.

Permanently enjoin Defendant, Suheil M. Judeh, from violating Section 17(a) of the Securities Act [15 U.S.C. 77q(a)], Section 10(b) of the Exchange Act [15 U.S.C. 78j(b)], and Rule 10b-5 thereunder [17 C.F.R. 240.10b-5].

II.

Order Defendant to disgorge his ill-gotten gains plus prejudgment interest thereon.

III.

Order Defendant to pay civil money penalties.

IV.

Retain jurisdiction of this action in accordance with the principles of equity and the Federal Rules of Civil Procedure in order to implement and carry out the terms of all orders and decrees that may be entered, or to entertain any suitable application or motion for additional relief within the jurisdiction of this Court.

V.

Grant such other and further relief as this Court may deem just, equitable, and necessary.

Dated: ______________________

Respectfully submitted,

_________________________
Robert L. Mitchell
Attorney for Plaintiff
Securities and Exchange Commission
44 Montgomery Street, Suite 1100
San Francisco, California 94104
(415) 705-2500


http://www.sec.gov/litigation/complaints/comp18579.htm


Modified: 02/26/2004