Texas Trader Charged With Affinity Fraud
On January 29, 2013, the SEC charged Firas Hamdan, a day trader in Sugar Land, TX, with “defrauding investors in his supposed high-frequency trading program and providing them falsified brokerage records that drastically overstated assets and hid his massive trading losses.”
“The SEC alleges that Firas Hamdan particularly targeted fellow members of the Houston-area Lebanese and Druze communities, raising more than $6 million during a five-year period from at least 33 investors. Hamdan told prospective investors that he would pool their investments with his own money and conduct high-frequency trading using a supposed proprietary trading algorithm. Hamdan promised annual returns of 30 percent and assured investors that his program was safe and proven when in reality it was a dismal failure, generating $1.5 million in losses.”
Hamdan targeting the Lebanese and Druze communities is another example of affinity fraud, which is a scheme where a fraudster attempts to use a common bond with investors to gain their trust and solicit investments. Hamdan is well-known in the Lebanese and Druze communities in the Houston area and is a former treasurer of the Houston branch of the American Druze Society.
“The complaint seeks various relief including a temporary restraining order, preliminary and permanent injunctions, disgorgement of ill-gotten gains with prejudgment interest, and financial penalties.”