Discount Brokerage Firm Specializes in Defrauding Athletes

When it was announced that the financial industry’s self funded watchdog had filed a complaint against Success Trade Securities, Inc., it stood out from the usual brokerage issue because the complaint alleged the company’s customer base consisted of NFL and NBA players.  While the complaint did not name any of the players with accounts at the firm, the connection itself tells us a lot about the nature of the industry and athlete financial management.

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Success Trade Securities did business primarily as a discount online broker through the websites just2trade.com and lowtrades.com.  The firm was based in Washington, D.C. but did business across the fifty states via these websites.  That alone does not make the firm disreputable, but the lower entry bar to e-commerce makes the medium more susceptible to disreputable actors, and careful investors should have taken the time to review the firm’s background before relying on them to make trades. If potential customers had done a review of Success Trade Securities, they may have moved on to greener pastures.  Success Trade Securities has only been in business for a little over a decade, but in that time has managed to rack up a number of violations.  In 2012 the firm was sanctioned for illegally failing to maintain its customer accounts, and for keeping accounts which appeared to be fraudulent or unsupportable.  For this the corporation was fined $100,000.00 and agreed to implement a training program.  In 2009, the firm was sanctioned and fined for failing to maintain the required amount of available capital.  Either of these sanctions implies major issues with Success Trade Securities and their business practice. Over leveraged finance firms are famously dangerous, as seen in the disastrous crash of 2007.  And finance fraud is dangerously destabilizing to any firm.  Both together at best indicate Success Trade practiced sloppy book keeping and played fast and loose with the rules, a good reason for any investor to steer clear.  But none of these allegations measured up to the conduct alleged in the latest complaint:  fraudulent sales. The regulatory watchdog has accused Success Trade of selling securities without any backing, and failing to disclose existing debt to investors.  The only way Success Trade can meet its obligations, it is alleged, is by selling additional notes to more investors.  This type of investment scheme is known colloquially as a “Ponzi Scheme.”  The most infamous of these was Bernie Madoff’s billion dollar hedge fund, which famously evaporated and took with it the savings and finances of a number of blue chip firms.   In addition to these allegations, it has been claimed that majority owner of Success Trade, Fuad Ahmed, used the firm’s accounts as his own personal bank account.  Currently there is a stop order preventing Success Trade from conducting any further business. Success Trade’s sloppy and fraudulent practices are not new, and as long as there are firms conducting these types of business there will be unethical firms taking advantage of investors.  What is unusual, however, is to see so many professional athletes get caught up in the allegations.  It’s particularly unusual when the warning signs of bad business practice are all there.  Any industry professional should have been able to identify the red flags surrounding Success Trade and redirect these athletes to better businesses.  Certainly they have the resources to afford such advice. It’s hard to specifically identify what drew these athletes to the firm without knowing the individuals in question.  Perhaps they all went to the same poor source and invested off that advice, perhaps it was simply locker room “word of mouth” which led so many to Success Trade’s door.  Perhaps Fuad recruited athletes specifically because their deep pockets and relatively limited experience with finance appealed to him. But it is clear that they could have done much better in selecting their firm of choice.  The signs were there, waiting to be heeded.