By Joe Johnson
A recent University of Georgia graduate ran a Ponzi scheme out of his Athens fraternity house, the U.S. Securities and Exchange Commission has alleged.
The SEC alleged that Syed Arham Arbab, 22, ran a fraudulent hedge fund known as Artis Proficio Capital Management or Artis Proficio Capital Investments, LLC, and raised at least $269,000 from May 2018 to May 2019.
Arbab allegedly used much of the money for his own purposes.
“From all of the accounts, he continued to divert investor funds for his own personal use, including bar and liquor store purchases, expenses at an adult entertainment club, and car trips via Uber,”the SEC alleges in a complaint filed on May 31 in U.S. District Court in Athens.
“In March and April 2019, he paid expenses of over $5,000 for two additional gambling trips to Nevada,” the complaint alleges.
The SEC filing identifies the Phi Kappa Tau chapter house on West Broad Street as the location Arbab listed for his bogus hedge fund. It does not allege any wrongdoing by the fraternity’s chapter.
Arbab could not be reached for comment.
In its complaint the federal regulatory agency seeks a preliminary halt to activities by Arbab and his businesses and to freeze assets from the alleged scheme in which the UGA grad allegedly targeted college students and other young investors.
"This is a reminder that investors of all ages and experience levels — whether long-time investors or recent graduates investing funds from their first few paychecks — should carefully research investment opportunities and the people offering them," Richard Best, regional director of the SEC’s Atlanta Office, stated in a news release issued on Monday.
“Because no securities trading occurred on behalf of the fund, the weekly spreadsheets distributed by Arbab and the individual investor profiles on the Fund’s website provided to investors by Arbab were completely fictitious,” the court filing states.
Arbab allegedly offered investments in his purported hedge fund, which he claimed had generated returns of as much as 56 percent in prior year and for which investor funds were guaranteed up to $15,000, according to the court filing.
Arbab also allegedly sold “bond agreements” which promised investors the return of their money along with a fixed rate of return. The SEC’s complaint alleges that at least eight college students, recent graduates, or their family members invested more than $269,000 in these investments.
According to the SEC’s complaint, no hedge fund existed and Arbab’s claimed performance returns were fictitious and he never invested the funds as represented.
Instead, as money was raised, Arbab allegedly placed substantial portions of investor funds in his personal bank and brokerage accounts, the SEC alleges.
Arbab also allegedly used portions of new investor money to pay earlier investors who had asked for their money back, which the SEC called the “hallmark” of a Ponzi scheme.
The SEC alleged that Arbab even instructed some new investors to send their money to existing investors through smartphone payment apps such as Venmo, Zelle, and Cash App, and misleadingly told them that the existing investors were either a “partner” or “manager” in the fund.
In addition to requesting a freeze on Arbab’s activities and assets, the SEC seeks the return of allegedly ill-gotten gains with prejudgment interest, and civil penalties.