A former broker is facing federal charges of securities fraud and investment adviser fraud in connection with a scheme that allegedly defrauded investors of nearly $800,000. Kenneth Thom, who referred to himself on social media as "K$" and "K Money," presented himself as a trading expert on Facebook after being suspended from his role as a broker, according to the U.S. Attorney for the Southern District of New York. Thom was arrested and is expected to appear before a U.S. magistrate judge. The case has been assigned to U.S. District Judge Edgardo Ramos.
As per the allegations in the indictment unsealed by the U.S. Attorney's Office, Thom used his social media presence to attract investors into a fraudulent scheme, presenting himself as an experienced and successful trader. Following his suspension, he attempted to restore his credibility by raising funds from members of a Facebook group, claiming he would manage a "shared account" and distribute profits from his trading activities.
The indictment reveals that Thom managed to raise almost $800,000 from about 67 clients. Despite this, he invested only around $350,000, diverting the bulk of the funds for personal use. The invested funds also suffered significant losses, with Thom reportedly losing over 70% of the total through unsuccessful options trades in under a year. In an effort to conceal these losses, he is accused of creating false performance updates that misrepresented the account's gains.
Thom's alleged misconduct extended beyond posting false performance reports. After the trading group’s Facebook name was changed to "AYBABTU," an acronym for "all your base are belong to us," he reportedly cut off all communication with his clients, raising further concerns about his conduct. "Kenneth Thom allegedly manipulated his client’s investments to not only place unsuccessful trades, but also promote an illusion of success," said FBI Assistant Director in Charge Christopher G. Raia, as per the press release. If convicted, Thom could face significant penalties, with up to 20 years in prison for the securities fraud charge and up to five years for the investment adviser fraud charge. However, these charges remain allegations, and Thom is presumed innocent unless and until proven guilty in court.
The case is being overseen by the Securities and Commodities Fraud Task Force with Assistant U.S. Attorney Alexander Li at the helm of the prosecution. The FBI has received commendations for their work on the case, alongside the U.S. Securities and Exchange Commission, which has initiated separate civil proceedings against Thom.
