U.S. market watchdogs wrapped up enforcement actions against multiple fraudulent investment operations yesterday (Wednesday), collecting over $4 million in combined penalties and restitution from schemes that bilked investors out of millions of dollars.
The Securities and Exchange Commission (SEC) finalized consent judgments against Justin Kimbrough and his firm Prosperity Consultants over a $3 million Ponzi scheme, while the Commodity Futures Trading Commission (CFTC) secured separate settlements totaling $2.8 million against a Florida commodity firm and imposed a $212,500 penalty on a trading company for wash sales.
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Texas Ponzi Operator Faces Lifetime Trading Ban
Federal regulators closed the book on Justin Kimbrough's fraudulent investment operation, which promised returns from real estate deals and medical product sales but instead funneled at least $1.75 million to the operators and existing investors.
"Rather than using investors’ money to finance the two purported businesses, Kimbrough and Nikopoulos retained at least $1.75 million for themselves and paid approximately $1.05 million to existing investors as purported 'dividend' or 'interest' payments in furtherance of the Ponzi scheme," the SEC commented in the official statement.
Kimbrough and his company Prosperity Consultants agreed to pay $1.2 million in disgorgement and interest, though those amounts were satisfied through criminal forfeiture proceedings. The settlement permanently bars Kimbrough from serving as an officer or director of any public company and prohibits him from participating in most securities transactions outside of personal trading on national exchanges.
The scheme operated from June 2020 through April 2021, targeting at least 31 investors with false promises that their funds would finance legitimate business ventures. Court documents show Kimbrough and co-defendant Terry Nikopoulos kept the majority of investor money for themselves while using new investor funds to pay fake "dividends" to earlier participants.
Related: Paul Atkins Slams Biden SEC: "It Would Shoot First and Ask Questions Later"
Florida Commodity Firm Pays $2.8 Million for Trade Allocation Fraud
The CFTC secured a substantial settlement from Systematic Alpha Management and its owner Peter Kambolin for systematically cheating commodity pool investors out of profitable trades.
Between January 2019 and November 2021, the Florida-based firm marketed cryptocurrency and foreign exchange trading strategies to investors while secretly directing winning trades to company accounts and assigning losing positions to client pools. The scheme defrauded pool participants of more than $1.2 million.
Kambolin received a two-year prison sentence plus 18 months of home confinement in related criminal proceedings. The civil settlement requires $1.2 million in victim restitution and $1.6 million in disgorgement, with a New York firm owned by Kambolin jointly liable for part of the penalty.
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Korean Securities Firm Sanctioned for Wash Trading
Shinhan Securities paid a $212,500 penalty to resolve CFTC charges that it engaged in wash sales on the New York Mercantile Exchange.
A trader at the Korean financial services company placed simultaneous buy and sell orders for identical contract quantities across accounts with the same beneficial owner, effectively eliminating price competition and market risk. The practice violated commodity trading rules designed to maintain fair and competitive markets.
The enforcement action represents another example of regulators' focus on maintaining market integrity, particularly in automated and high-frequency trading environments where such violations can occur rapidly and repeatedly.
