A fast-food worker obtained $200,000 of advance credit by making bogus deposits, the SEC says.
The Auntie Anne's employee piled the entire sum into Tesla, Nvidia, GameStop, AMC, and other stocks.
His broker caught on and liquidated the holdings a day later, making a roughly $7,000 profit.
A fast-food worker duped his online broker into giving him $200,000 of advance credit, then plowed the ill-gotten funds into stocks including Tesla, Nvidia, GameStop, and AMC Entertainment, according to the Securities and Exchange Commission.
Deyonte Jahtori Anthony, 23, was a part-time employee of an Auntie Anne's in North Carolina last summer. On July 1, he applied for a self-directed brokerage account, claiming he earned between $25,000 and $50,000 a year when he was only making about $400 a month, the SEC said in a complaint filed on August 25 and viewed by Insider.
Anthony linked his trading account to a bank account with only 9 cents in it, then initiated unfunded deposits totaling $1 million between July 5 and 6. The pending deposits granted him access to $200,000 in immediate credit, which he plowed into eight stocks and an exchange-traded fund on July 6, the SEC said.
The pretzel-shop worker piled about $85,000 into Apple, $78,000 into GameStop, $22,000 into Nvidia, $13,000 into AMC Entertainment, and $700 into Tesla. He invested another $800 across Cano Health, Electronic Arts, Resolute Forest Products, and ETFMG Prime Cyber Security, per the SEC.
GameStop and AMC are both "meme stocks" that skyrocketed in price in early 2021, as retail investors bought them en masse in a bid to punish short sellers and pocket huge gains in a matter of days. Tesla and Nvidia also have passionate fanbases who expect the pair to win big from the artificial-intelligence revolution. Intense hype has helped to nearly double and more than triple the automaker and graphics-chip company's respective stock prices this year.
The broker discovered Anthony's alleged fraud the next day, froze his account, and liquidated all of his holdings. The short-lived purchases proved lucrative; the broker made about a $7,000 profit, including a roughly $4,700 return on GameStop, $1,600 on Apple, and $800 on Nvidia. All but one of Anthony's trades were in the green when his broker cashed out, the SEC complaint shows.
Anthony wasn't able to withdraw any money before his account was frozen. His deposits were later reversed due to insufficient funds, and he was fired from Auntie Anne's on July 9 after not showing up for work. He admitted to making the deposits and misleading his broker under oath during investigative testimony, regulators said.
"When asked why he made the $1 million in unfunded deposits without having funds to cover the transactions, Anthony excused his conduct as 'a joke' and said that he 'never really thought of it as fraud,"' the SEC said.
Anthony tried to execute what's known as a "free-riding" scheme, where a trader makes bogus deposits to access advanced credit, then tries to use that credit to make money and withdraw it before their broker catches on and freezes their account, the federal agency explained.
The SEC said in its complaint that it's seeking to ban Anthony from trading securities without the necessary funds in his account, and force him to disclose this incident if he opens a brokerage account in the future.
Anthony couldn't immediately be reached for comment by Insider.
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