U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 25893 / November 15, 2023
Securities and Exchange Commission v. Matthew Melton, No. 1:23-cv-10060 (S.D.N.Y. filed Nov. 15, 2023)
SEC Charges Algorithmic Trader Matthew Melton with Defrauding Investors Out of More Than $1.5 Million
The Securities and Exchange Commission today charged Matthew Melton for fraud in connection with material misrepresentations to investors about the performance of his Price Physics trading algorithm and his misappropriation of more than $1.5 million of investor proceeds.
According to the SEC’s complaint, which was filed in the United States District Court for the Southern District of New York, between April 1, 2018, and October 31, 2020, Melton raised more than $3.4 million from at least 23 investors in Puerto Rico and elsewhere who shared an affinity for outdoor activities. Melton allegedly asserted that he would profitably trade stock index futures through the use of his Price Physics trading algorithm, which, he claimed, had generated consistent returns of 12 percent per month. Contrary to these claims, the complaint alleges, Melton’s trading was consistently unprofitable. According to the complaint, to invest with Melton, investors signed a loan agreement or promissory note and sent funds directly to Melton’s personal bank accounts, where the funds were commingled with other investor funds. As alleged in the complaint, rather than use the investors’ money as promised, Melton misappropriated more than $1.5 million of investor funds to make Ponzi-like payments to other investors and to pay for his personal expenses, such as travel, sailing, and mortgage payments.
The SEC’s complaint charges Melton with violations of the federal securities laws and seeks permanent injunctive relief, a conduct-based injunction, disgorgement plus prejudgment interest, civil penalties, and an officer-and-director bar.
In a parallel action, the U.S. Attorney’s Office for the Southern District of New York today announced criminal charges against Melton.
The SEC’s investigation was conducted by Rebecca Reilly, Neil Hendelman, and Sandeep Satwalekar in the New York Regional Office. The litigation will be led by Ms. Reilly and Mr. Satwalekar. The case is being supervised by Thomas P. Smith, Jr. The SEC appreciates the assistance of the United States Attorney’s Office for the Southern District of New York and the FBI.