(Reuters) - A former securities broker that regulators said took part in a multi-million dollar fraud against professional athletes must pay $2 million to former NBA player Sam Young, an arbitration panel ruled on Monday.
Young's professional basketball career has included stints with the Indiana Pacers and San Antonio Spurs. He was among dozens of investors who lost money after buying privately issued securities sold by the now defunct Washington, D.C.-based brokerage, Success Trade Securities.
The Financial Industry Regulatory Authority (FINRA) ejected the firm and its chief executive from the securities industry in June after ruling it ran a Ponzi scheme.
The private Wall Street watchdog also ordered Success Trade to pay $13.7 million in restitution to the investors.
Some of the numerous current and former professional athletes who lost money, including Young, have also filed individual securities arbitration cases against Success Trade, former Chief Executive Officer Fuad Ahmed and their former broker, Jinesh “Hodge” Brahmbhatt.
FINRA arbitrators on Monday found Brahmbhatt liable in Young's case. The ruling includes $1 million in punitive damages, a rare measure aimed at punishing misconduct, lawyers said.
Young, who now plays for an Italian league, alleged civil fraud and negligence, according to the FINRA arbitrators.
Efforts to locate Brahmbhatt were not successful.
Success Trade and Ahmed, who were also named in case, have settled with Young, according to the ruling. The settlement terms are unclear, and a lawyer for Success Trade and Ahmed declined to comment.
Brahmbhatt, who did not respond to Young's arbitration case, agreed to be barred permanently from the securities industry in 2013 after failing to testify in the enforcement case against Success Trade, according to a FINRA document.
The June enforcement case against Success Trade focused on $19.4 million of promissory notes issued by the firm's parent company, Success Trade Inc, to investors between 2009 and 2013. Ahmed and the brokerage misrepresented or omitted material facts that would have revealed the company's dire financial condition, according to FINRA.
Young's investments also included notes in an alarm system company that turned out to be in poor financial shape, said Jeffrey Sonn, whose law firm in Fort Lauderdale, Florida handled the arbitration.
"We're very pleased the arbitrator awarded punitive damages because, at its heart, this was a scam of our client and many other professional athletes," Sonn said. "These notes never should have been offered to anyone."
Reporting by Suzanne Barlyn.; Editing by Chris Reese and Andre Grenon