A suspended broker is charged with raising money from investors who followed him on social media and then misappropriating it for his own luxury purchases, Financial Advisor reports.
The U.S. Attorney’s Office for the Southern District of New York announced that 41-year-old Kenneth Thom of Westfield, New Jersey has been arrested and charged with securities fraud and investment adviser fraud.
In January 2011, the Financial Industry Regulatory Authority suspended Thom’s broker registration after he failed to pay an arbitration award to an investor. Thom also admitted to FINRA that he had commingled the client’s money with his own money in an account he controlled and then lost the money trading. He further admitted that when the investor sought to withdraw her funds, he did not tell her he lost it and instead invented fake excuses, then ignored the investor altogether.
After being suspended by FINRA, prosecutors said Thom turned to social media under the monikers “K$” and “K Money,” and promoted himself online as a successful trader, a “Wall Street veteran,” a “luminary,” and a “beacon of knowledge.” He allegedly used his online platforms to sell trading courses and trade suggestions to his followers, including a Facebook group in which he posted the results of his purportedly successful trades.
“Beginning in late 2023, Thom invited members of the K$ Facebook Group to participate in “shared accounts” that Thom would manage in exchange for a percentage of the trading profits,” the U.S. Attorney’s office said. “Thom eventually raised nearly $800,000 from approximately 67 clients. Of this sum, Thom invested only approximately $350,000, diverting most of the remainder for his own personal use, including on travel, dining, and luxury goods.”
Of the $350,000 that Thom invested, he lost more than $250,000 trading options for a net loss of approximately 73%. To hide the losses, he allegedly published false performance updates showing significant gains.
“After his suspension as a broker, Kenneth Thom used social media to steal from investors,” said U.S. Attorney Jay Clayton. “If you’re getting investment advice from someone who is not registered as a broker or investment advisor, the risk of fraud is much higher. We will hold accountable anyone who preys on everyday investors who rightly expect their trading professionals to be in good standing and act in their best interests.”
“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. “Thom’s alleged incessant deceit betrayed the trust of investors by failing to disclose his misuse and loss of client funds.”
In January, Thom changed the name of his Facebook group to “AYBABTU,” an acronym for the Internet meme that means “all your base are belong to us.” He also stopped responding to clients, according to prosecutors.
If convicted of securities fraud, Thom faces a maximum sentence of 20 years in prison, while the charge of investment advisor fraud carries a maximum sentence of five years in prison.
The attorneys at Hyman Cotter PC have decades of experience dealing with securities fraud cases and have a deep understanding of how capital markets and financial service firms are intended to work to protect investors. If you think your financial professional or firm engaged in misconduct that caused you investment losses, contact Hyman Cotter PC at 312-291-4600 or through our online contact form for a no-cost evaluation of your matter.
