Court signs consent judgment in SEC’s case against Ponzi scammer targeting college kids

Source: FinanceFeeds 2020-04-28

Syed Arham Arbab, who ran a purported hedge fund, is permanently restrained from engaging in any act, practice, or course of business which operates as a fraud or deceit.

The Georgia Middle District has signed a consent order in the action brought by the Securities and Exchange Commission (SEC) against Syed Arham Arbab, a former student at the University of Georgia. As reported in June 2019, Arbab and two entities under his operation and control – Artis Proficio Capital Investments, LLC (APCI) and Artis Proficio Capital Management, LLC (APCM), are accused of fraud.

According to the SEC’s complaint, between at least May 2018 and as recently as May 17, 2019, Arbab, acting individually or through APCI and APCM, offered and sold investments in a purported hedge fund, called Artis Proficio Capital. He promised very high rates of return, and sent investors account updates purporting to substantiate those claims. Arbab also offered and sold certain “bond agreements,” which function like promissory notes.

Arbab described himself as the Fund’s “Partner” and “Chief Investment and Financial Officer.” Arbab is not registered with the Commission in any capacity.

In May 2018, Arbab began soliciting investors for investments in the Fund, which he told investors he managed and controlled. He represented to investors that he had already finished his undergraduate degree and was working on a master’s degree in business administration (MBA) from UGA. In reality, Arbab did not receive an undergraduate degree from UGA until May 2019, which was in cellular biology and genetics. He has never been enrolled in UGA’s MBA program.

In text messages and emails to investors and potential investors, Arbab made multiple representations about the Fund, including that:

his “firm” was “different because we target young investors/college kids;”
money invested in the Fund was “GUARANTEED and backed up to 15,000$;”
the Fund had earned annual returns that he variously described as ranging between 22 to 56 percent;
the Fund would have lower costs than most other hedge funds because Arbab would not take any percentage of the initial investment and would only take “15% off [an investor’s] capital gains after calculating taxes;”
investors could withdraw their money with two weeks advance notice.

Contrary to Arbab’s claims, the Fund never existed, and, upon information and belief, there is no brokerage account existing in the name of the Fund, APCI, or APCM.

As per the consent judgment, seen by FinanceFeeds, Arbab is permanently restrained and enjoined from violating, directly or indirectly, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5, by using any means or instrumentality of interstate commerce, or of the mails, or of any facility of any national securities exchange, in connection with the purchase or sale of any security:

(a) to employ any device, scheme, or artifice to defraud;
(b) to make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; or
(c) to engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person.

The defendant is also permanently restrained and enjoined from violating Section 17(a) of the Securities Act of 1933 in the offer or sale of any security by the use of any means or instruments of transportation or communication in interstate commerce or by use of the mails, directly or indirectly:

(a) to employ any device, scheme, or artifice to defraud;
(b) to obtain money or property by means of any untrue statement of a material fact or any omission of a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; or
(c) to engage in any transaction, practice, or course of business which operates or would operate as a fraud or deceit upon the purchaser.

Furthermore, Arbab is permanently restrained and enjoined from violating directly or indirectly, Section 206(4) of the Advisers Act and Rule 206(4)-7, while acting as an investment adviser, by use of the mails, or any means or instrumentality of interstate commerce, directly or indirectly to engage in any act, practice or course of business which is fraudulent, deceptive, or manipulative, including:

(a) failing to adopt and implement written policies and procedures reasonably designed to prevent violations, by the investment adviser and its supervised persons, of the Advisers Act and the rules that the Commission has adopted under the Advisers Act;
(b) failing to review, no less frequently than annually, the adequacy of the policies and procedures established and the effectiveness of their implementation; and
(c) failing to designate an individual (who is a supervised person) responsible for administering the written policies and procedures that the investment adviser adopted pursuant to Rule 206(4)-7.

Finally, the order envisages that Arbab will have to pay disgorgement of ill-gotten gains, prejudgment interest thereon, and a civil penalty. The Court will determine the amounts of the disgorgement and civil penalty upon motion of the Commission.

Court signs consent judgment in SEC’s case against Ponzi scammer targeting college kids

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