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MF Global Holdings Ltd
A Texas day trader illegally raised more than $6 million from the Houston-area Lebanese community by making false promises that his algorithmic trading program would generate 30 percent returns, U.S. regulators said.
Firas Hamdan, 49, hid $1.5 million in losses from his 33 investors, telling them the funds were tied up in the Greek debt crisis and the 2011 MF Global Holdings Ltd. (MFGLQ) bankruptcy, the Securities and Exchange Commission said in a lawsuit filed today at U.S. District Court in Houston. Hamdan, who raised the money from 2007 to 2012, is contesting the SEC’s claims.
“Hamdan’s affinity scam preyed upon people’s tendency to trust those who share common backgrounds and beliefs,” David Woodcock, director of the SEC’s regional office in Fort Worth, Texas. “Hamdan raised money by creating the aura of a successful day trader among friends and family in his community, and he continued to mislead them and hide the truth while trading losses mounted.”
Hamdan told fellow members of the Lebanese and Druze communities that he would pool their investments with his own money and conduct high-frequency trading using a proprietary trading algorithm, the SEC said. He showed them phony documentation of positive returns in 59 of 60 months from 2007 through 2012, and falsely claimed that a well-known Dallas-area hedge fund manager had invested $1 million with him, according to the lawsuit.
“Mr. Hamdan is disappointed the SEC took this step,” said Robert Heim, Hamdan’s attorney at Meyers & Heim LLP in New York. “We intend to contest the SEC’s case, and we believe the SEC’s allegations are without merit.
The SEC is seeking disgorgement of ill-gotten profits and other financial penalties.
To contact the reporters on this story: Joshua Gallu in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Maura Reynolds at email@example.com