4 Indicted After Stealing $2M From Financial Services Company: Feds

SUFFOLK COUNTY, NY — A two-count indictment was unsealed in federal court on Tuesday, charging four men — including three Long Islanders — with stealing more than $2 million from a California-based global financial services company through a securities fraud and money laundering scheme, Breon Peace, United States Attorney, Eastern District of New York announced on Tuesday.

Eduardo Hernandez, 33, of Lindenhurst was arrested Tuesday in Atlantic City, New Jersey and will be arraigned in federal court in Brooklyn before United States Magistrate Judge Lois Bloom, officials said.

Christopher Flagg, 28, and Daquan Lloyd, 29, both of Copiague, were also arrested Tuesday on Long Island and will be arraigned in federal court in Central Islip before United States District Judge Gary R. Brown, federal officials added.

The fourth man, Corey Ortiz, 29, of Greensboro, North Carolina, remains at large, feds said.

Using the instant deposits available to the "losing Aacounts", the men repeatedly bought thinly traded and highly speculative stock options at above-market prices, prosecutors said.

Selecting these "virtually worthless" stock options enabled the men to match their bids in the losing account with offers to sell the same overpriced stock options initiated by other brokerage accounts, or “winning ccounts,” that were also controlled by the m and their conspirators, prosecutors added.

In effect, they transferred the instant deposits from the losing accounts to the winning accounts by way of fraudulent securities transactions, prosecutors said.

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, officials said.

Those wire transfers, therefore, failed to clear — but not before the men drained the instant deposits, leaving the accounts with negative balances and worthless options, prosecutors said.

They then laundered the stolen funds through multiple electronic banking platforms, prosecutors added.

In total, the men recruited dozens of individuals to engage in their fraudulent scheme and stole more than $2 million, prosecutors said.

"The defendants are charged with stealing millions of dollars by creating fraudulent brokerage accounts and engaging in sham trading," said Peace. "For years, the defendants deceived others to line their own pockets. Today’s indictment shows that this office will hold accountable anyone who tries to manipulate the financial system."

If convicted, the men face up to 25 years in prison, officials said.