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An indictment unsealed in Central Islip federal court on Tuesday, Oct. 31, charges four men with conspiring to commit securities fraud and money laundering.
The following Suffolk County residents are named in the indictment:
- Christopher Flagg (aka “Venus”), age 28, of Copiague
- Daquan Lloyd (aka “Payday”), age 29, of Copiague
- Eduardo Hernandez (aka “Ghost”), age 33, of Lindenhurst
According to prosecutors, the group created hundreds of sham brokerage accounts in order to use short-term cash advances which they then stole through a complex options trading scheme.
The cash advances, or “instant deposits,” were meant to help legitimate investors immediately trade in their brokerage accounts without waiting for wire transfers to clear.
As the deposits were capped at $5,000 per account, the defendants recruited people from other states to open hundreds of fraudulent accounts, prosecutors allege.
The group is accused of transferring instant deposits from highly speculative stock options to so-called “winning accounts” through fraudulent securities transactions.
“Meanwhile, the incoming wire transfers supposed to cover the instant deposits in the losing accounts had purposely been initiated by the defendants from bank accounts that had little or no balance,” prosecutors said.
“These wire transfers, therefore, failed to clear, but not before the defendants drained the instant deposits, leaving the accounts with negative balances and worthless options.”
Between December 2018 and January 2021, Flagg, Lloyd, and Hernandez allegedly stole more than $2 million.
They then laundered the money through various electronic banking platforms, prosecutors said.
“This type of scam is not only illegal but weakens the public’s faith in our financial marketplace. The FBI will continue to ensure that anyone attempting to benefit from this type of fraud is punished in the criminal justice system,” said FBI Assistant Director-in-Charge James Smith.
Hernandez was arrested Wednesday in Atlantic City, New Jersey, and was expected to be arraigned in federal court in Brooklyn.
Flagg and Lloyd were taken into custody Wednesday morning on Long Island and will be arraigned in Central Islip federal court.
A fourth defendant, Corey Ortiz, of Greensboro, North Carolina, is still at large.
If convicted, they face up to 25 years in federal prison.
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