A barred Connecticut investment advisor and broker has been criminally charged with defrauding LPL Financial, Fidelity and TD Ameritrade of more than $3.3 million by allegedly exploiting the delay in electronic fund transfers between his personal bank and brokerage accounts to make high-risk trades.
LPL, with which the advisor was affiliated, accounts for more than $3 million of that amount, according to an indictment.
A federal grand jury returned the 11-count indictment last month against Andrew M. Komarow, 36, of Avon, David X. Sullivan, the U.S. Attorney for the District of Connecticut, and the FBI announced Tuesday, one day after the former advisor pleaded not guilty to the charges and was released on a $50,000 bond.
The indictment charges Komarow with 10 counts of wire fraud, an offense that carries a maximum 20-year prison term on each count, and one count of securities fraud, which also carries a potential 20-year sentence, Sullivan's office said.
Prosecutors allege that Komarow took advantage of credit extended by the financial services companies and exploited the delay between his bank-to-brokerage account transfers, also known as automated clearing house transfers, before the investment companies posted and cleared the transactions.
While a press release didn't identify the financial services companies, the indictment alleges, "As a result of his scheme and artifice to defraud, Komarow caused Fidelity, LPL Financial, and TD Ameritrade to incur losses totaling approximately $3,352,407."
From October 2022 to February 2023, Komarow initiated about $8.9 million in electronic fund transfers from his bank accounts to multiple, often newly opened brokerage accounts, despite having insufficient funds in the bank accounts to support the transfers, prosecutors allege.
He then used the brokerage accounts to conduct high-risk, short-term options trading in an attempt to make immediate profits to cover his insufficient funds, causing the investment companies more than $3.3 million in losses, according to prosecutors.
Komarow was registered as a broker with LPL and as an investment advisor with Private Advisor Group from 2016 through 2022, his Financial Industry Regulatory Authority BrokerCheck and Investment Adviser Public Disclosure records show.
The indictment alleges that he directed an "Individual B" to lie to LPL about trades the company was questioning, gave the individual instructions on what to say to LPL, and misled that person about nonexistent incoming transfers to cause the individual to help place trades and relay misinformation.
At one point, Komarow offered Individual B bonuses to encourage the person to convince LPL Financial to execute options trades, the indictment alleges. Komarow "wrote to Individual B, 'lie, whatever you have to do, to get those trades placed,'" the indictment alleges.
In late 2022, when Komarow's LPL brokerage account showed a negative balance exceeding $3 million due to short-term options trading, he acknowledged the trades and electronic transfers were invalid, telling LPL's compliance department, "'I am able to say they are not valid now, because of course I don't have that kind of money,'" according to the indictment.
LPL terminated its relationship with Komarow in December 2022. The Securities and Exchange Commission and FINRA have barred him from working in the financial industry as a broker or advisor, and the Connecticut Banking Commissioner permanently barred him as well.
Charles Schwab & Co. acquired TD Ameritrade in 2020 but didn't finish moving accounts until May 2024.
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