U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 25962 / April 2, 2024
Securities and Exchange Commission v. Treusch, No. 1:24-civ-01050 (E.D.N.Y. filed Feb. 11, 2024)
SEC Charges Additional Defendant for Role in Lucrative “Free-Riding” Scheme
On February 11, 2024, the Securities and Exchange Commission charged Travis Treusch, a Long Island, New York resident, in connection with his role in a multi-year “free-riding” scheme. Treusch consented to a partial resolution of the charges. The SEC previously charged Eduardo Hernandez, Christopher Flagg, Daquan Lloyd, and Corey Ortiz, also all currently or formerly of Long Island, New York, for their roles in the scheme that generated more than $2 million in illicit profits.
The SEC alleges that, from approximately July 2020 through January 2022, Treusch aided and abetted Hernandez and Flagg (the “Principals”) in a free-riding scheme, in which the Principals opened and used unfunded brokerage accounts (the loser accounts) to generate trading profits in other brokerage accounts that they also controlled (the winner accounts). The complaint alleges the Principals maintained the loser accounts at a broker that provided an instant deposit credit, which they used to fund trades at manipulated prices. The complaint alleges that in doing so, the Principals essentially transferred the credit provided by the broker from the loser accounts to the winner accounts, accumulating guaranteed profits at the broker’s expense. The complaint alleges that Treusch opened a loser account himself and recruited others to do the same for use in the scheme, and then provided the Principals with the account login credentials so the Principals could access and control the loser accounts in the names of those recruited, thereby deceiving the brokers. The SEC alleges that Treusch also recruited at least two individuals to set up accounts and cede control of them to Hernandez, who used them as winner accounts in the scheme. According to the complaint, Treusch was compensated for each account he secured for the scheme.
The SEC’s complaint, filed in the U.S. District Court for the Eastern District of New York, charges Treusch with aiding and abetting the Principals’ violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Without admitting or denying the allegations in the SEC’s complaint, Treusch consented to a bifurcated judgment enjoining him from violations of the charged provisions and a conduct-based injunction, with the duration of the conduct-based injunction and the amount of monetary relief to be determined by the court upon motion of the SEC. The settlement is subject to Court approval.
The SEC’s investigation was conducted by Cynthia A. Matthews, David Austin, Matthew Lambert, John Marino, Pat McCluskey and Lindsay S. Moilanen of the New York Regional Office and the SEC Enforcement Division’s Market Abuse Unit, and is being supervised by Joseph Sansone. The SEC’s Office of Market Intelligence provided assistance. The SEC’s litigation will be conducted by Ms. Matthews and Christopher Dunnigan and supervised by Preethi Krishnamurthy.