SEC Sues Three Arizona Residents for Defrauding Broker-Dealers in a Free-Riding Scheme
Litigation Release No. 24864 / August 11, 2020
Securities and Exchange Commission v. Vu Anh Nguyen, et al., No. 2:20-cv-01582-DWL (D. Ariz. filed August 11, 2020)
The SEC today announced fraud charges against Arizona resident Vu Anh Nguyen for orchestrating a scheme to trade securities without sufficient funds - known as "free riding" - causing a total of over $1 million in 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 alleges that Nguyen immediately began trading securities in the accounts. According to the complaint, 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.
The SEC's investigation was conducted by staff in the SEC's Los Angeles Regional Office. The SEC's litigation will be led by Daniel Blau and Amy Jane Longo.