SEC Charges North Carolina Man in Fraudulent “Free-Riding” Scheme

On August 25, 2023, the Securities and Exchange Commission (SEC) took legal action against Deyonte Jahtori Anthony, a 23-year-old resident of Concord, North Carolina. Anthony has been charged with orchestrating a fraudulent “free-riding” scheme, during which he engaged in the purchase of securities valued at almost $200,000 without making the necessary payments for them.

As detailed in the SEC’s complaint, Anthony executed this scheme between July 1 and 6, 2022. He initiated the deception by submitting a fraudulent application to establish a new brokerage account. This application contained overstated information about his personal income. Anthony further manipulated the situation by initiating bogus deposits totaling $1 million from his bank account. It’s noteworthy that, at that specific time, his bank account balance amounted to a mere nine cents. The complaint also reveals that prior to the reversal of Anthony’s deposits due to insufficient funds in his bank account, he capitalized on “immediate access” credit furnished by his broker-dealer. He utilized this credit to purchase securities worth $199,956.65. However, the broker-dealer identified the fraudulent scheme before Anthony could realize any gains. Consequently, the broker-dealer froze his account and liquidated the holdings.

The complaint filed by the SEC has been presented to the United States District Court for the Middle District of North Carolina. The charges against Anthony include violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. Although Anthony has neither admitted nor denied the allegations presented in the SEC’s complaint, he has chosen to agree to a judgment. This judgment, contingent on court approval, would impose a permanent injunction on him to prevent future breaches of the charged provisions. Additionally, the judgment would encompass injunctions against his future activities involving brokerage. Furthermore, Anthony would be subject to a civil penalty, the exact amount of which would be established at a later date by the court, following a motion by the Commission.