SEC Seeks Emergency Relief to Halt Ponzi Scheme Run from College Fraternity House
Litigation Release No. 24486 / June 3, 2019
Securities and Exchange Commission v. Syed Arham Arbab, Artis Proficio Capital Investments, LLC, and Artis Proficio Capital Management, LLC, Civil Docket, No. 3:19-cv-00055-CDL, (M.D. Ga. filed May 31, 2019)
The Securities and Exchange Commission today announced an emergency action charging a recent college graduate with orchestrating a Ponzi scheme that targeted college students and young investors. The SEC is seeking an asset freeze and other emergency relief.
The SEC's complaint alleges that Syed Arham Arbab, 22, conducted the fraud from a fraternity house near the University of Georgia campus in Athens, Georgia. Arbab allegedly offered investments in a purported hedge fund called "Artis Proficio Capital," which he claimed had generated returns of as much as 56% in the prior year and for which investor funds were guaranteed up to $15,000. Arbab also allegedly sold "bond agreements" which promised investors the return of their money along with a fixed rate of return. The SEC's complaint alleges that at least eight college students, recent graduates, or their family members invested more than $269,000 in these investments.
According to the SEC's complaint, no hedge fund existed, Arbab's claimed performance returns were fictitious, and he never invested the funds as represented. Instead, as money was raised, Arbab allegedly placed substantial portions of investor funds in his personal bank and brokerage accounts, which he used for his own benefit, including trips to Las Vegas, shopping, travel, and entertainment. Arbab also allegedly used portions of new investor money to pay earlier investors who had asked for their money back, the hallmark of a Ponzi scheme. Arbab even instructed some new investors to send their money - unwittingly - to existing investors through payment applications such as Venmo, Zelle, and Cash App, and misleadingly told them that the existing investors were either a "partner" or "manager" in the fund.
The SEC's complaint, filed Friday in federal district court in Athens, Georgia, charges Arbab, Artis Proficio Capital Investments LLC, and Artis Proficio Capital Management LLC, with violating Section 17(a) of the Securities Act of 1933, as well as Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 206(1), (2) and (4) of the Investment Advisers Act of 1940, and Rule 206(4)-8 thereunder. The SEC is seeking an order freezing certain assets of Arbab and his entities, as well as a temporary restraining order, preliminary and permanent injunctive relief, return of allegedly ill-gotten gains with prejudgment interest, and civil penalties.
The SEC's investigation was conducted by Brian M. Basinger, W. Shawn Murnahan, and Krysta M. Cannon of the Atlanta Regional Office. The investigation was supervised by Stephen E. Donahue. The litigation is being handled by Mr. Murnahan, with the assistance of Mr. Basinger, and will be overseen by M. Graham Loomis.