April 11 A Wall Street regulator said on
Thursday it has charged a Washington-based online brokerage with
civil fraud related to the sale of promissory notes to 58
investors, including current and former professional basketball
and football players.
The Financial Industry Regulatory Authority (FINRA), an
industry-funded watchdog, alleged in a complaint that Success
Trade Securities Inc and Chief Executive Fuad Ahmed
misrepresented that they were raising $5 million through the
sale of promissory notes. It said they continued to sell the
notes, even though the sales exceeded the original offering by
more than 300 percent.
The FINRA documents did not disclose the athletes' names.
Success Trade Securities and Ahmed plan to defend against
FINRA's complaint in an upcoming hearing, said Fabian Jarrin,
the brokerage's chief compliance officer. Success Trade is
still operating and the investors have not lost their money,
Most of the notes promised to pay an annual interest rate of
12.5 percent on a monthly basis over three years, with some
notes promising to pay interest as high as 26 percent, FINRA
FINRA alleged Ahmed and Success Trade did not disclose the
amount of the company's existing debt to investors, or that it
was not able to make future interest payments to them without
raising money from new investors.
Investors allegedly were also not told that Ahmed intended
to use proceeds from the sales to pay about $4 million in
interest to other noteholders and a $1,300 per month lease on
his Range Rover, according to the complaint.
Ahmed also allegedly used proceeds to finance personal
expenses, such as travel and clothes, through undocumented
interest-free loans, FINRA said.
FINRA ordered Success Trade and Ahmed to temporarily stop
selling the notes and refrain from other activities because the
investors were at risk of losing their money before FINRA can
hear and decide the disciplinary case, according to a regulatory
document. The firm and Ahmed agreed to the order.