SEC Charges Investment Advisor with Naked Short Selling

The Securities and Exchange Commission has filed charges against investment advisor Sabby Management LLC and its managing partner, Hal D. Mintz, for engaging in a fraudulent scheme known as "naked short selling." This scheme involved manipulating the market by artificially deflating the price of securities, allowing them to acquire more shares at a lower price per security. These deceptive practices, along with other prohibited trading activities, resulted in illicit profits exceeding $2 million.

SEC Charges Investment Advisor for Circumventing Trading Rules in Naked Short Selling Scheme.

The Securities and Exchange Commission (SEC) has filed a complaint accusing Sabby Management LLC and its managing partner, Hal D. Mintz, of repeatedly evading trading regulations to engage in illegal trades involving the stocks of at least 10 public companies. The complaint alleges that the defendants participated in a fraudulent scheme that included the practice of "naked short selling," wherein they intentionally executed short sales without borrowing or locating the shares and subsequently failed to deliver the shares within the required timeframe.

The SEC's complaint states that Sabby and Mintz aimed to generate profits through unlawful means that they could not have achieved through legitimate trading practices. Furthermore, the complaint asserts that the defendants manipulated the price of securities through their naked short selling, enabling them to acquire additional shares at a lower cost.

To conceal their illicit activities, the complaint alleges that Sabby and Mintz used securities acquired after the trades to create the appearance of compliance with the borrowing or locating requirement. Additionally, when questioned by brokers regarding their trading activities, they reportedly provided false information multiple times.

Carolyn Welshhans, Associate Director of the SEC's Division of Enforcement, emphasized the SEC's commitment to holding accountable those who attempt to manipulate the market and defraud investors.

The SEC's complaint, filed in the U.S. District Court for the District of New Jersey, charges Sabby and Mintz with various violations, including those under the Securities Exchange Act of 1934 and the Investment Advisers Act of 1940. The SEC seeks permanent injunctive relief, disgorgement of ill-gotten gains with interest, and civil penalties as remedies in the case.