Young Investor Faces Charges Over Meme Stock Fraud Worth $1 Million

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In a daring financial escapade, 23-year-old Deyonte Jahtori Anthony has been charged by federal securities regulators for executing a "free-riding scheme". The audacious plot saw Anthony, an employee at a North Carolina Auntie Anne’s pretzel shop, allegedly leveraging $1 million in pending deposits to purchase $200,000 worth of meme stocks, including GameStop and AMC, without actually possessing the funds. The young pretzel shop worker had opened a brokerage account by asserting an annual income between $25,000 and $50,000, despite his actual earnings amounting to approximately $400 a month from his job and other part-time work.

The U.S. Securities and Exchange Commission (SEC), in its complaint, accused Anthony of exploiting his brokerage’s $200,000 "immediate access" credit by initiating $1 million in bank transfers. Astoundingly, these transfers were initiated from an account holding only $0.09. Anthony’s fraudulent trades were not limited to meme stocks; he also bought shares in Apple, Tesla, and a cybersecurity-focused exchange-traded fund (ETF) with the ticker symbol HACK. The scheme was halted only after a broker discovered Anthony’s income misrepresentation and froze the account, but not before the trades were executed.

Federal Regulators Charge 23-year-old With Meme Stock Trading Fraud

In a shocking case of securities fraud, 23-year-old Deyonte Jahtori Anthony, a pretzel shop worker from North Carolina, has been charged by federal securities regulators for executing a "free-riding scheme."

The scheme involved using $1 million in unfulfilled deposits to purchase $200,000 worth of meme stocks, without ever having the funds to cover the purchase. Anthony manipulated his brokerage’s "immediate access" credit system, initiating $1 million in pending bank transfers from an account that only contained $0.09.

A Risky Bet on Meme Stocks

Anthony, whose income from part-time jobs including working at Auntie Anne’s pretzel shop was roughly $400 a month, falsely claimed an annual income between $25,000 and $50,000 to open a brokerage account. According to the U.S Securities and Exchange Commission’s (SEC) complaint, a broker discovered the misrepresentation and froze Anthony’s account only after the fraudulent trades were executed.

Anthony’s risky bet included meme stocks like GameStop and AMC Entertainment, along with Apple, Tesla, and a cybersecurity-focused ETF with the ticker symbol HACK. Despite using non-existent funds, Anthony managed to turn a profit of over $7,000 from these trades.

No More Trading for Anthony

Despite the financial success of his fraudulent endeavor, Anthony’s actions have led to serious legal consequences. Although he did not admit to any wrongdoing, he has agreed to a government order prohibiting him from trading securities in the future. He also agreed to pay an undisclosed civil penalty that is pending approval by a federal judge in North Carolina.

Anthony claimed his actions were simply "a joke" and he "never really thought of it as fraud." However, this case serves as a stark reminder of the risks and legal implications associated with fraudulent trading activities.

A Cautionary Tale for Retail Investors

The rise of no-fee trading and gamified investment apps has made it easy for retail investors to jump on the bandwagon of popular stocks. While some investors have turned a profit, Anthony’s case serves as a warning that fraudulent activities can lead to serious legal consequences.

The increasing allure of meme stocks has highlighted the need for stringent checks and balances in the trading ecosystem to prevent such fraudulent activities. Unlike Anthony, successful investors, or at least those who have not been charged with fraud, fund their trades with actual money.

My Takeaways

It’s clear that the gamification of trading and the surge of interest in meme stocks can lead to risky and even fraudulent behavior. This case underscores the importance of financial literacy and legal awareness for retail investors. It also highlights the need for brokerages to implement more robust checks to prevent such fraudulent activities.

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