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The victims of Syed Arbab, a former student of the University of Georgia who allegedly ran a false hedge fund in a fraternal home, said that he had taken their money by taking advantage of their friendship.
"I really trusted him," said Connor Campbell, 22, who has known Arbab since high school. "It's one that I never thought I could do."
The US Securities and Exchange Commission filed a civil complaint with six counts in a federal court in Georgia last week, alleging that between May 2018 and May 2019, Arbab had sold investments in the fund. coverage that had never existed and spent a portion of the funds on liquor, hotels, etc. Uber, gambling and a trip to Las Vegas that included a stop in an "adult entertainment club".
Arbab, 22, has received at least $ 269,000 from a total of eight investors and has transferred much of the money to his personal bank account, the lawsuit says.
In addition to spending money to his advantage, the SEC claims that Arbab has used funds to make Ponzi payments to previous investors wishing to withdraw all or part of their investment, and "cheated investors into them." asking to unintentionally send Ponzi payments directly to other investors "with the help of applications such as Venmo or Cash App.
Campbell, a resident of Michigan, says that he started investing with Arbab while he was at the university because "[h]e was really good at [investing] … and when he did it legitimately, he made big investments and a lot of money. "
According to Campbell, about three months ago, Arbab asked him to invest in a hedge fund that he was managing.
Campbell said that Arbab had sent him a wallet, saying he was fired and given him the name of "smart people" that Campbell knew who had invested in Arbab's company.
"I had enough confidence at that time to invest money," Campbell said.
Campbell said he initially invested $ 5,000, but Arbab convinced him to invest an additional $ 1,500. Campbell said that Arbab continued to apologize when he asked for his money and that he still had not returned it.
"Even if the signs of a Ponzi scheme were present, I never thought that [Arbab] would do something like this. "
Richard Best, regional director of the SEC office in Atlanta, said the case is an example of someone who benefits young investors.
"Many people think that this type of fraud can only happen to people with large resources. this case shows that this can happen to new investors – people who enter the labor market and do not necessarily have a lot of resources, "said Mr. Best. Taking small amounts of money from people who do not have a lot of resources can be just as damaging because it has an impact on living expenses, but also on the ability to pay for education. "
Jonathan Swift, 22, says he's known Arbab since college and has approached Arbab to invest after seeing his publications on social networks show his wealth.
Swift said the messages, including the one in which Arbab claimed to have bought a Corvette with money, made him think that "Arbab" must be legitimate.
"Especially as a student, I just want to earn a few dollars," said Swift.
Swift said he was wary of the vague contract to the complicated terminology that Arbab had him sign. He therefore invested only $ 200, which Swift described as "mediocre" compared to the thousands of dollars that others invested.
"He certainly used our relationship to his advantage," said Swift. "It is clear that he had some type of insecurity, where he needed that lifestyle to attract more people to him, or something like that." impression that it is deeper than what he was doing, because he clearly did not need the money. I feel for the guys, but what he did was wrong. "
SEC investigators said that Arbab had been untruthfully presented as a graduate of the University of Georgia who was preparing a master's degree in business administration. He was a student at the University of Athens, 70 km east of Atlanta, but had not yet obtained his undergraduate degree.
"It's a classic affinity fraud (…), fraudsters use their relationships with a particular group to win the trust of their victims," Mr. Best said. "Here, there are two groups: one is his affiliation with the University of Georgia community and the one at the University of Georgia. The other group is his affiliation with the brotherhood and community, and because of his affiliation with these groups, they trusted him. "
According to the complaint, Arbab sent SMS stating that his "business" was "different because we target young investors / students" and that the investments were "GUARANTEED and backed up to $ 15,000". According to the civil complaint, Arbab also incorrectly asserted that the hedge fund had generated annual returns ranging from 22 to 56%, and had distributed a fictitious spreadsheet to over 110 investor accounts "in order to extol the Fund's performance. and to solicit additional investments ".
When asked to comment, Arbab told NBC News a statement he tweeted: "I'm here to apologize to the investors who believed in me and to apologize that my strategies did not work the way it was supposed to … this restitution is necessary for such errors and they will be distributed accordingly.
"My intention was to get returns for my investors and grow my business.Unfortunately, the company took the opposite direction and today, I am here to publicly declare that I recognize the company. 39; error. "
The SEC is only empowered to bring civil suits. In the case of Arbab, the SEC seeks to freeze its assets, prevent it from destroying documents and electronic devices, pay civil penalties and return ill-gotten funds, said Best. However, Arbab could still be the subject of a criminal investigation by other government entities.
Better said "time will tell" if the victims will get their money back.
"We have to see what money is available after Mr. Arbab's expenses," he said. "Unless there are other resources to repay investors, they might not recover everything."
The SEC suggests investors check the background and disciplinary history of anyone selling or investing them through Investor.gov.
"When they invest, individuals must look not only for the product, but also for the individual," said Mr. Best.
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