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Massachusetts Man Sentenced for BD Fraud

Nathanial Ponn, a defendant in an ongoing SEC litigation, was sentenced to 15 months imprisonment for orchestrating a three-year scheme that defrauded numerous brokerage firms. In addition, Ponn was ordered to pay more than $20,000 in restitution to three brokerage firms for losses caused by his fraudulent conduct.

The SEC previously charged the Massachusetts resident with engaging in a scheme to defraud numerous unnamed broker-dealers over more than seven years in an action filed on March 31st.

Beginning as early as 2007, but escalating in 2014 and continuing into at least April 2015, Ponn defrauded numerous brokerage firms through phony bank transfers to newly opened brokerage accounts.

According to the original complaint, over the course of the scheme, Ponn opened approximately 600 brokerage accounts and attempted to fund them with bogus bank transfers totaling $8.7 million.

Of this amount, broker firms credited Ponn’s accounts for $6.3 million, which he then used to purchase $2.9 million worth of securities. Once the broker firms discovered the fraudulent nature of the bank transfers, they locked his accounts, sold off the accounts’ holdings, and ultimately closed the accounts.

The SEC noted that Ponn attempted to withdraw at least $271,000 from these accounts, but the internal control procedures of most firms prevented him from making cash withdrawals before the bank transfers were confirmed. Moreover, his fraudulent securities purchases of approximately $2.9 million caused the broker firms to suffer net trading losses of approximately $26,000, and put them at risk for much more.

As previously reported by The DI Wire, Ponn pled guilty to three counts of wire fraud in the parallel criminal action in December.

The SEC’s litigation against Ponn continues. The SEC’s complaint seeks a permanent injunction plus disgorgement, prejudgment interest, and penalties. The SEC was assisted by the U.S. Attorney’s Office for the District of Massachusetts and the Federal Bureau of Investigation.

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