A Financial Industry Regulatory Authority (“FINRA”) hearing panel has expelled brokerage firm Success Trade Securities and ordered $13.7 million in restitution for alleged securities fraud and for running a Ponzi scheme. In addition to expelling the Washington, D.C. based firm, the FINRA hearing panel also barred Success’ President and CEO, Fuad Ahmed, from any association with any FINRA member firm in any capacity. Success and Ahmed were jointly and severally ordered to pay $13.7 million in restitution to 59 investors, the bulk of which are current and former professional athletes.
According to FINRA, it filed a complaint against Success and Ahmed in April 2013 asserting fraud in connection with the sales of $19.4 million worth of promissory notes issued by Success Trade, Inc. (“Success Trade”), Success’ parent company. According to the hearing panel’s decision, the offering documents omitted material facts that would have shown that Success Trade was in financial trouble, having lost money every year for more than a decade, except for 2007.
FINRA claimed that Success and Ahmed also misrepresented to investors that the proceeds from the sale of the promissory notes would be used to promote Success Trade’s business when, in reality, investors’ funds were used to make unsecured personal loans to Ahmed and to make interest payments to earlier investors, in true Ponzi-scheme fashion. FINRA’s press release also reflects that Ahmed falsely represented to investors that the businesses were thriving and about to be listed on a European exchange and that he was soon going to acquire an Australian company for $15 million.
According to Reuters, some of the harmed investors include Detroit Pistons guard Brandon Knight, Cleveland Browns cornerback Joe Haden, a defensive tackle for the Miami Dolphins, Jared Odrick, and former Redskins running back Clinton Portis. FINRA claimed that many of the athlete investors were financially inexperienced, just beginning their careers out of college.
The FINRA decision will become final in 45 days if not appealed to or called for review by FINRA’s National Adjudicatory Council.
In November, a former Success Trade broker, Jinesh “Hodge” Brahmbhatt, was barred from FINRA for failing to appear and give testimony.
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