In the Matter of Behruz Afshar, et al.

The Securities and Exchange Commission (SEC) (plaintiff) charged brothers Behruz and Shahryar Afshar, along with affiliates (defendants), with manipulating the securities market. The SEC alleged that the Afshars had intentionally misidentified trades to avoid transaction fees and to obtain execution priority and that they had effectuated manipulative trades to collect liquidity rebates from the exchange. The Afshars, who were sophisticated traders and former registered representatives, inaccurately tagged trades as being for public customers, not professional traders. The intentional mislabeling allowed the Afshars to avoid millions of dollars of transaction fees and gave their trades priority over other accurately labeled trades. Additionally, the Afshars were involved in a “spoofing” scheme to manipulate the exchange, by which they would lodge orders for securities that they had no intention of completing. As a result of the spoofing of orders, the Afshars received liquidity rebates and induced others to bid at the same price. The Afshars’ activities were particularly impactful because of high-frequency trading with algorithms, which allowed fast trades and increased susceptibility to intentional market disruptions. After being charged by the SEC, the Afshars submitted an offer of settlement, which the SEC accepted. The SEC then issued an administrative order.