A FINRA hearing panel expelled Success Trade Securities, Inc., which is based in Washington, D.C., from membership and barred Fuad Ahmed, the firm’s CEO and President, for the fraudulent sale of promissory notes and for creating a Ponzi scheme. The firm and Ahmed are also jointly and severally ordered to pay about $13.7 million in restitution to 59 investors, most of whom are current and former NFL and NBA players.
FINRA issued a complaint against Success Trade and Ahmed in April 2013, charging them with fraud in the sales of promissory notes issued by Success Trade, Inc., the firm’s parent company. Additionally, FINRA filed a Temporary Cease and Desist Order to immediately stop activities. The firm and Ahmed consented to the order.
The FINRA hearing panel found that Ahmed and Success Trade sold $19.4 million in Success Trade promissory notes to investors while misrepresenting or omitting material facts between February 2009 and March 2013. Ahmed and Success Trade omitted material facts from the offering documents that would have shown that the firm’s parent company was in a poor financial situation. Ahmed admitted that the parent company lost money every year for the last fourteen years with the exception of 2007. Success Trade and Ahmed further misrepresented that the proceeds would be used for business expenses to promote and build the parent company’s business. However, the proceeds were actually used to make unsecured loans to Ahmed for personal expenses and to make interest payments to existing noteholders. As a result, a Ponzi scheme was created that allowed the fraudulent scheme to continue.
As notes issued in 2009 and 2010 began to mature, Ahmed attempted to persuade investors to convert their notes to equity or to extend the term of the notes by leading them to believe that his business was succeeding and about to be listed on the European stock exchange, when in fact it was not. Ahmed additionally, falsely led investors to believe that he was about to make a $15 million acquisition of an Australian Company.
Success Trade and Ahmed were also sanctioned for selling unregistered securities. Given the expulsion and bar, however, these sanctions were not imposed. The hearing panel’s decision will become final in forty-five days unless it is appealed to FINRA’s National Adjudicatory Council or the Council calls for a review.
If you or someone you know has lost money as a result of an investment, please contact Richard Frankowski at 888-741-7503 to discuss your potential legal remedies.