A Washington, D.C.-based brokerage firm has been expelled from the U.S. Financial Industry Regulatory Authority (FINRA) and ordered to pay millions in restitution after it was found to have defrauded pro athlete investors and created a Ponzi scheme.
FINRA announced today that a hearing panel has expelled Success Trade Securities, Inc. from the self-regulatory organization and barred its CEO and president, Fuad Ahmed, for the fraudulent sale of promissory notes and the creation of a Ponzi scheme. They were also ordered to pay approximately US$13.7 million in restitution to 59 investors, largely current and former National Football League and National Basketball Association players.
The regulator brought a complaint and temporary cease trade order against the firm in 2013. Today, it said that, following a hearing into the allegations made in that complaint, a regulatory panel found that between February 2009 and March 2013, the firm sold US$19.4 million in promissory notes to investors while misrepresenting its “dire financial condition”.
It also found that investors were told their funds would be used for business expenses and to build its businesses when, in fact, they were used to make unsecured loans to Ahmed for personal expenses, and to make interest payments to existing noteholders, which effectively created a Ponzi scheme.
The hearing panel’s decision may still be appealed. If it is not, the decision becomes final after 45 days.