Long Island Man Pleads Guilty to “Free-Riding” Securities Fraud Scheme
|U.S. Attorney’s Office November 04, 2010|
Earlier today, in federal court in Brooklyn, Noor Mohammed of Deer Park, New York, pleaded guilty to a one-count felony information charging him for his role in a "free-riding" securities fraud scheme in which he and others used checks to buy securities in brokerage accounts without having sufficient funds to pay for them. The guilty plea proceedings were held before United States District Judge John Gleeson. Mohammed faces a maximum statutory sentence of 20 years’ incarceration, as well as the payment of restitution to the victims of his crimes.
The guilty plea was announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York, and Janice K. Fedarcyk, Assistant Director-in-Charge of the Federal Bureau of Investigation, New York Field Office.
To execute the scheme, Mohammed and others opened brokerage accounts with option trading privileges and deposited bad checks ranging from $30,000 to $190,000 into these accounts causing the brokerage firms to credit the accounts in the amount of the checks. Shortly thereafter, Mohammed and others purchased over $1 million worth of short-term option contracts that expired within a day prior to the time that the bad checks bounced. When the option contracts declined in value, Mohammed failed to fund the account, and the brokerage firm was left with the loss. When the option contracts increased in value, Mohammed deposited sufficient funds to cover the purchase price of the option contracts, sold the option contracts, and withdrew the trading profits. The scheme resulted in more than $600,000 in net trading losses to the brokerage firms who were victimized by the scheme.
Ms. Lynch expressed her grateful appreciation to the FBI, the agency responsible for leading the government's investigation, and thanked the United States Securities & Exchange Commission for its assistance. Ms. Lynch added that the investigation is continuing.
The government's case is being prosecuted by Assistant United States Attorneys Scott Klugman and Shannon Jones.