The Securities and Exchange Commission today charged broker-dealer TradeZero America Inc., and its co-founder, Daniel Pipitone, with falsely stating to the firm’s customers that they didn’t restrict the customers’ purchases of meme stocks when in fact they did.
In late January 2021, many brokers restricted investors’ ability to purchase a group of highly volatile stocks generally known as “meme stocks.” According to the SEC’s order, on January 28, 2021, TradeZero was instructed by its clearing broker not to allow its customers to purchase three meme stocks. TradeZero ultimately halted purchases for about 10 minutes. After the halt, TradeZero and Pipitone made misleading public statements via interviews, social media, and in a press release in an effort to distinguish their company from brokers that restricted trading during that period. For example, in a Reddit “Ask Me Anything,” Pipitone said, “That some trading firms are blocking these symbols is disgusting, unprecedented… Our clearing firm tried to make us block you and we refused.”
“This case sends a powerful message that participants in our capital markets cannot exploit market turbulence to deceive customers,” said said Melissa Hodgman, Associate Director of the SEC’s Division of Enforcement. “The SEC has been committed to ensuring that our capital markets continue to function in times of uncertainty, and today’s action highlights this commitment.”
TradeZero and Pipitone consented to the entry of the SEC’s order finding that they violated Sections 17(a)(2) and (3) of the Securities Act of 1933. Without admitting or denying the charges, TradeZero and Pipitone agreed to a cease-and-desist order, retention of an independent compliance consultant to ensure future compliance with the federal securities laws, a $100,000 penalty for TradeZero, and a $25,000 penalty for Pipitone.
The SEC’s investigation was conducted by Heather A. Powell and Jason D. Schall of the SEC’s Washington, D.C. office. They were supervised by Assistant Director Melissa Robertson and Ms. Hodgman.
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