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Client made $8.7M in bogus transfers: SEC

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A brokerage client who pleaded guilty to making trades through falsely credited funds must disclose the fraud case if he ever tries to open another account.

Nathaniel D. Ponn, 28, may not do business with any brokerage firm in the future without providing the SEC complaint and the final judgment issued by a federal judge in Boston last week. Ponn pleaded guilty in December to three felony counts of wire fraud, receiving a 15-month prison term in March.

SEC investigators and federal prosecutors charged him with the $8.7 million fraud scheme in March 2016. Ponn used automated clearing house transfers from fake bank accounts or ones lacking the funds requested to dupe nine brokerages between 2012 and 2015, an FBI special agent wrote in an affidavit.

Ponn set up about 400 different accounts through brokerages such as Fidelity and T. Rowe Price online and over the phone, the agent said. The case provides a cautionary tale on providing clients with credit into brokerage accounts for trading without first confirming their funds.

While some firms blocked the bogus transfers by attempting to verify the accounts, others gave him credit for a total of $6.3 million, according to SEC investigators. He then purchased mutual funds, ETFs and stocks in 75 companies in $2.9 million worth of trading, investigators said.

A public defender who represented Ponn in the criminal case did not respond to a phone call and email Friday morning.

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Ponn admitted the scheme when agents questioned him at his Boston home in August 2015, according to the affidavit. He often used his sister’s name and Social Security number to open accounts, along with made-up names and Social Security numbers, when his own stopped working, the document shows.

The fraud largely failed to enrich Ponn or harm the brokerages, outside of roughly $20,000 in net losses suffered by three firms, according to court documents. Ponn managed to secure $300 once, despite trying to transfer all investment gains out of the accounts before the firms processed his bad checks and wire transfers, he told FBI agents.

U.S. District Judge Allison Burroughs ordered Ponn to pay a fine of $300 and provide restitution of $18,224 to Fidelity, $2,252 to T. Rowe Price and $262 to E-Trade. Representatives for the three firms did not respond to requests for comment about the case.

Ponn’s year-long sentence carries three years of parole with required drug testing, counseling for substance abuse and mental health treatment. He has a history of drug or alcohol dependence and a mental and emotional condition, court documents show.

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