The U.S. Securities and Exchange Commission (SEC) charged a North Carolina man with allegedly defrauding brokerage firms in a “free-riding” scheme that used credit offered by the firms to acquire almost US$900,000 in securities without having the money to pay for them.
According to the SEC’s complaint, in early 2024, Aaron O’Brian Freeman made nearly US$3.5 million worth of deposits and transfers into brokerage accounts from accounts that were closed or had no money in them, and then sought to acquire securities using the “instant credit” provided by the firms before they realized the deposits were fake.
“Each broker-dealer ultimately discovered the scheme, froze Freeman’s access to the accounts, reversed the deposits and liquidated the positions,” the SEC said. The firms only faced small losses as a result.
The SEC charged Freeman with allegedly violating securities rules. It is seeking disgorgement, interest and a civil penalty, along with permanent injunctive relief and a conduct-based injunction in the case.
The allegations have not been proven.