In a case involving a somewhat unusual fact pattern, the U.S. Securities and Exchange Commission (SEC) obtained a final judgment against Suyun Gu, a resident of Miami Florida, who was previously charged with engaging in a fraudulent trading scheme to collect liquidity rebates from securities exchanges through wash trading of thinly traded put options.
Filed in the United States District Court for the District of New Jersey, the SEC’s enforcement action charged Gu with violating Sections 9(a)(1) and 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”), Rule 10b-5 thereunder, and Sections 17(a)(1) and (2) of the Securities Act of 1933 (“Securities Act”). Section 9 of the Exchange Act specifically prohibits stock manipulations, while the other two charged sections generally proscribe fraudulent acts.
The SEC’s complaint alleged Gu used broker-dealer accounts that paid liquidity rebates to place options orders on one side of the market, and then used other broker-dealer accounts that did not charge fees for taking liquidity for subsequent orders on the other side of the market for the same options, resulting in hundreds of thousands of dollars in alleged illegal profits.
The Court found that Gu executed more than 11,000 wash trades between accounts he controlled, involving approximately three million options contracts. The Court also found that Gu: (1) went to great lengths to conceal his trading scheme and to deceive other market participants, including by using a series of virtual private servers to mask his internet protocol address and hide the fact that he was trading in others’ accounts, (2) added false information to the trading account profiles of friends and family whose accounts he traded in, (3) made false and misleading statements to brokerage firms when they asked questions about his trading, and (4) willfully ignored red flags about the propriety of his conduct by continuing his scheme at other brokerage firms after his trading accounts were suspended.
The consent judgment permanently enjoined Gu from violating the filed charges and ordered him to pay $621,703 in disgorgement of ill-gotten gains plus $134,663 in prejudgment interest thereon, and a civil penalty of $621,703.
Contact Fraudulent Trading Scheme Attorney David R. Chase
Nationally recognized SEC enforcement defense attorney David Chase, of the Law Firm of David R. Chase, has successfully represented individuals in SEC investigations around the nation for more than 25 years, having previously served in the SEC’s Division of Enforcement as a Senior Counsel. If you are under SEC investigation, or just received a SEC subpoena or Wells Notice anywhere in the nation or abroad, and require experienced and strategic counsel to guide you through the SEC investigation process and protect your legal rights, contact David at: 800-760-0912 or e-mail him at: david@davidchaselaw.com. Visit the Firm’s website to read about David’s SEC defense background, the SEC investigatory process, and the firm’s prior successful results for its clients at: www.securitiesfrauddefense.net.
