A trader who exploited brokerage firms that provided instant credit to new clients is being sanctioned in a settlement with the U.S. Securities and Exchange Commission (SEC).
The regulator filed a settled enforcement action in the U.S. district court for the Eastern District of North Carolina against Mayur Baviskar, alleging that, between March 2019 and September 2024, he carried out a “free-riding” scheme involving 11 brokerage accounts at nine different firms.
According to the SEC’s complaint, Baviskar initiated US$377,200 worth of unfunded deposit transfers during the period — using bank accounts that either lacked the funds required, or halting transfers from accounts that did have enough money — and then used the instant trading credit provided by the firms to trade securities before the misconduct was discovered and the firms froze his accounts.
In total, the SEC alleged that Baviskar traded over US$1.4 million in securities without having the money to pay for the trades, and withdrew US$6,000 in trading profits generated by the unfunded trades.
The trading resulted in five brokers suffering a combined loss of US$13,555, while three firms made a profit of US$49,427, and one firm came out even.
Without admitting the SEC’s allegations, Baviskar consented to the entry of a final judgment that orders him to disgorge his illicit profits, to pay US$1,914 in interest, and a US$50,000 penalty.
The settlement, which is subject to court approval, would also impose a permanent injunction against Baviskar, which restrains him from opening a brokerage account without providing the firm with a copy of the enforcement action.