Two Michigan Men Charged by SEC for Roles in Fake Day-Trading Scheme
There is a truth in investing that if a deal seems too good to be true, it probably isn’t true. We all want a good bargain. Unfortunately, crooks and scammers know that, and they use these great bargains to lure unsuspecting victims into their schemes.
This was true with a scheme involving Nonko Trading and two Michigan men who were charged by the SEC on September 5, 2018, for their involvement with the fake-day trading firm.
The SEC had previously charged four other individuals and two entities in connection with the Nonko fraud.1
The two Michigan men, Christopher Eikenberry of Birmingham, and Jeffrey Goldman of West Bloomfield, both had held securities licenses and were associated with a number of registered broker-dealers for over 20 years, including during the time period of their involvement with the Nonko fraud. What they did was participate in establishing and operating an offshore broker-dealer, Nonko Trading, which bypassed the United States broker-dealer registration requirements and regulations, while targeting day-traders based in the United States.
In some cases, Nonko secretly provided those day-traders with training accounts that merely simulated the placement and execution of trade orders. The trade orders were never routed to the markets, and the Nonko team pocketed the money for trade orders placed using these training accounts.
The U.S.-based day-traders were lured to Nonko Trading to engage in electronic day-trading in the U.S. securities markets, starting in late 2013. Nonko offered terms that were not available at any SEC-registered broker-dealer in the U.S., including low trading commissions, which were typically at or below $0.006 per share; a minimum deposit of only $2,500 or lower; as well as leverage, or margin, of 20:1 which purported to give traders the ability to trade $20 of total capital for each dollar deposited.2
The Financial Industry Regulatory Authority or FINRA rules actually prohibit such low account balances and high leverage ratios for day-traders in the U.S.
The Nonko team devised a strategy whereby they brought on day-traders who were inexperienced and/or had a history of losing money in the market. These “losing” traders were less likely to make money on the market, and thus more unlikely to withdraw funds from their accounts. The SEC Complaint alleges that Goldman and Eikenberry collected an agreed-upon portion of the fraud’s proceeds, which they funneled to themselves through bank accounts of intermediary entities.3 Over 260 investors in 30 countries worldwide, including 180 investors in the United States, were defrauded out of $1.4 million in this scheme.
If you have any questions related to securities fraud or investment fraud, please contact our Securities Law Office. Victims of financial schemes, broker misconduct and negligence suffer beyond financial losses. We have been helping investors recover losses from fraudulent financial advisors for over 20 years!
1 SEC Charges Two Men with Fraud in Fake Trading Accounts Scheme, www.sec.gov, 9/5/2018
2,3 Securities and Exchange Commission Complaint against Jeffrey Goldman and Christopher Eikenberry, Case 2:18-cv-13550, Document 1, Filed 09/05/18