The Securities and Exchange Commission today charged brothers Sang N. Phan and Rich N. Phan (the "Phans") of Columbus, Georgia, with conducting a fraudulent "free-riding" scheme in which they attempted to profit by purchasing and selling stocks without paying for them.

The SEC's complaint states that, from at least February 2021 to May 2021, the Phans used falsified brokerage account applications and bank accounts with minimal funds to induce two broker-dealers to provide instant deposit credits of more than $222,000 into four brokerage accounts controlled by one or both of them. The complaint also states that after deceiving the broker-dealers into providing credit in anticipation of the incoming deposits, the Phans made a series of online securities purchases with plans to withdraw their profits before their bogus bank deposits reversed. None of the Phans' trading was actually profitable, according to the complaint, as Sang Phan's trading resulted in losses of approximately $13,000, while all of Rich Phan's trading was cancelled by a broker-dealer that linked his trades to those of his brother.

The Complaint, filed in the Middle District of Georgia, charges the Phans with violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The SEC seeks injunctive relief and financial penalties against the Phans, as well as disgorgement of ill-gotten gains plus prejudgment interest from Sang Phan.

The SEC's investigation was conducted by Brian M. Basinger of the Atlanta Regional Office, and under the supervision of Stephen E. Donahue and Justin C. Jeffries. The litigation will be handled by Edward G. Sullivan and supervised by M. Graham Loomis.