The SEC charged Eduardo Hernandez, Christopher Flagg, Daquan Lloyd, and Corey Ortiz with fraud, all of whom currently or previously resided on Long Island, New York, and carried out a multi-year "hitchhiking" scheme that resulted in more than $2 million in illegal profits.

The SEC alleges that from approximately November 2018 to January 2022, the defendants operated a "piggyback" scheme in which brokerage customers bought and sold securities without having the funds to pay for the transactions.

The complaint alleges that the defendants opened and used unfunded brokerage or losing accounts to generate trading profits by matching trades with winning brokerage accounts that they also controlled. The defendants opened the losing accounts at a broker-dealer that offered instant deposit credit and used that credit to fund trades between the losing accounts and the winning accounts at manipulated prices while using dilutive trading options.

It is further alleged that in doing so, Defendants essentially transferred credit provided by the broker-dealer from the losers' account to the winners' account, accumulating guaranteed profits at the broker-dealer's expense. In sum, during the relevant period, the defendants allegedly used at least 600 brokerage accounts to repeatedly perpetrate the fraudulent scheme.

The SEC filed suit in the United States District Court for the Eastern District of New Hampshire, charging Hernandez and Flagg with

1. Violated the antifraud provisions of Section 10(b) of the Securities Exchange Act of 1934 and Rules 10b-5(a) and (c) thereunder;
2. The SEC further violated these provisions by acting through or in the manner of another person in violation of Section 20(b) of the Exchange Act;

In addition, the SEC alleges that Ortiz and Lloyd aided and abetted Hernandez and Flagg's violations of Section 10(b) of the Exchange Act and Rule 10(b)(5)(a) and (c) thereunder.