U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 25908 / December 8, 2023
Securities and Exchange Commission v. Andrew M. Komarow, No. 3:23-cv-01599 (D. Conn. filed December 8, 2023)
SEC Charges Connecticut Resident with Fraudulent "Free-Riding" Scheme
The Securities and Exchange Commission today filed charges against Andrew M. Komarow of Avon, Connecticut. The SEC’s complaint charges Komarow with conducting a fraudulent "free-riding" scheme in which he attempted to profit by purchasing and selling securities without paying for them.
The complaint alleges that, from October 2022 to January 2023, Komarow engaged in a pattern of making unfunded electronic transfers of money from various bank accounts to at least ten accounts at four broker-dealers, knowing that he did not have sufficient funds in the bank accounts to cover the transfers. The complaint further alleges that Komarow immediately began trading securities in the brokerage accounts using funds that the brokerage firms made temporarily available while the fraudulent transfers were pending. When those transfers did not materialize, the brokerage firms were left with trading losses. According to the complaint, Komarow made false deposits totaling over $6.9 million. Komarow’s trading was largely unprofitable: he removed at least $615,031 from the accounts but left the brokerage firms with losses totaling over $3 million, avoiding having to make good the losses himself.
Komarow, without admitting or denying the allegations in the SEC's complaint, consented to the entry of a partial judgment, which permanently enjoins him from violating the antifraud provisions of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The partial judgment also bars Komarow from opening any brokerage account without first providing the brokerage firm with a copy of the SEC's complaint and final judgment in this matter and prohibits him from placing any securities trades without having settled cash in the account equal to or greater than the amount of the trades. The partial judgment leaves to a later decision by the court whether to order disgorgement of Komarow’s ill-gotten gains plus prejudgment interest and a civil monetary penalty. The partial judgment also orders that Komarow will be barred from serving as an officer or director of any public company for a period of time to be determined later by the court. Komarow’s settlement offer is subject to approval by the court.
The SEC's case was handled by by Cassandra Arriaza, David Fox, John McCann, Kathleen Shields, and Celia Moore