Litigation Releases (Christopher Flagg; Daquan Lloyd; Travis Treusch)

U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 26545 / April 30, 2026

Securities and Exchange Commission v. Hernandez

, No. 23-civ-08110 (E.D.N.Y. filed Oct. 31, 2023);

Securities and Exchange Commission v. Treusch,

No. 24-civ-01050 (E.D.N.Y. filed Feb. 11, 2024)

SEC Obtains Final Consent Judgments as to Christopher Flagg, Daquan Lloyd, and Travis Treusch in Connection with Alleged "Free-Riding" Scheme

On April 27, 2026, the United States District Court for the Eastern District of New York entered final consent judgments as to defendants Christopher Flagg, Daquan Lloyd and Travis Treusch for their roles in an alleged $2 million "free-riding" scheme.

The SEC filed an initial complaint against Flagg, Lloyd and others on October 31, 2023, and a related complaint against Treusch on February 11, 2024.

The SEC's complaints alleged that Flagg, Lloyd, Treusch and two others participated in a fraudulent free-riding schemewhereby they opened and used unfunded brokerage accounts (the loser accounts) to generate trading profits in other brokerage accounts that they also controlled (the winner accounts). The complaints further alleged that the defendants maintained the loser accounts at a broker that provided an instant deposit credit, which they used to fund trades at artificial prices and repeatedly generate trading profits. In doing so, the defendants allegedly transferred the credit provided by the broker from the loser accounts to the winner accounts, accumulating guaranteed profits at the broker's expense. All told, over a four-year period, the defendants allegedly used at least 600 brokerage accounts to conduct the fraudulent scheme. Specifically, the complaints alleged that Lloyd and Treusch each aided and abetted Flagg and one other defendant who acted as principals in the scheme, by opening loser accounts in their own respective names and recruiting others to do the same for use in the scheme.

The SEC charged Flagg with violations of Section 10(b) of the Securities Exchange Act of 1934 (the "Exchange Act") and Rules 10b-5(a) and (c) thereunder and further violating these provisions by acting through or by means of another person in violation of Exchange Act Section 20(b). The SEC charged Lloyd with aiding and abetting violations of Section 10(b) of the Exchange Act and Rules 10b-5(a) and (c) thereunder. The SEC charged Treusch with aiding and abetting violations of Section 10(b) of the Exchange Act and Rules 10b-5(a) and (c) thereunder.

The Court entered partial consent judgments as to Flagg, Lloyd, and Treusch, on February 4, 2025, September 6, 2024, and April 18, 2024, respectively. The partial judgments permanently enjoined them from further violations of the antifraud provisions of the federal securities laws they were charged with violating and imposed a conduct-based injunction against each defendant prohibiting each from opening a brokerage account without first providing to the relevant brokerage firm(s) a copy of the SEC complaint and any judgment against him in this matter.

The final consent judgment as to Flagg ordered him liable for disgorgement of $56,390.00 and prejudgment interest thereon of $5,570.00, payment of which is deemed satisfied by the orders of restitution and forfeiture entered against him in the parallel criminal action, United States v. Hernandez et al., 23 cr. 428 (E.D.N.Y.), and determined that the previously-entered conduct-based injunction against Flagg would remain in effect for a period of five years.

The final consent judgment as to Lloyd ordered him liable for disgorgement of $376,050.00 and prejudgment interest thereon of $37,145.75, payment of which is deemed satisfied by the orders of restitution and forfeiture entered against him in United States v. Hernandez et al. and determined that the previously-entered conduct-based injunction against Lloyd would remain in effect for a period of five years.

The final consent judgment as to Treusch ordered him to pay disgorgement of $50,000.00 and prejudgment interest thereon of $4,939.00, payment of which is deemed satisfied by the orders of restitution and forfeiture entered against him in the parallel criminal action, United States v. Treusch, 24 cr. 010 (E.D.N.Y.), and determined that the previously-entered conduct-based injunction against Treusch would remain in effect for a period of three years.

The SEC's investigation was conducted by Cynthia A. Matthews, David Austin, John Marino, Pat McCluskey, and Lindsay S. Moilanen of the SEC's New York Regional Office and the Enforcement Division's Market Abuse Unit, and was supervised by Joseph Sansone, Chief of the Market Abuse Unit. The SEC's litigation is being led by Christopher J. Dunnigan, Ms. Matthews, and Ms. Moilanen, and is being supervised by Jack Kaufman. The SEC appreciates the assistance of the U.S. Attorney's Office for the Eastern District of New York and the FBI