SEC v. Hernandez

Christopher Flagg, Daquan Lloyd, and Travis Treusch allegedly participated in a $2 million “free-riding” scheme by opening and using unfunded brokerage accounts to generate trading profits in other brokerage accounts they controlled. The complaints further alleged that the defendants maintained the loser accounts at a broker that provided an instant deposit credit, which they used to fund trades at artificial prices and repeatedly generate trading profits. The defendants allegedly transferred the credit provided by the broker from the loser accounts to the winner accounts, accumulating profits at the broker’s expense. Over a four-year period, the defendants allegedly used at least 600 brokerage accounts to conduct the fraudulent scheme. Lloyd and Treusch each allegedly aided and abetted Flagg and one other defendant who acted as principals in the scheme, by opening loser accounts in their own respective names and recruiting others to do the same for use in the scheme.

Summary generated from official Securities and Exchange Commission press release