Mayur Baviskar, of Morrisville, North Carolina, ran what the SEC calls a free-riding scheme for more than five years across accounts at nine different broker-dealers. Free-riding is the practice of buying and selling securities without having the money to pay for them, and it is prohibited under Regulation T of the Federal Reserve Board. The mechanism Baviskar exploited is a convenience feature: many retail brokerages extend instant deposit credit the moment a customer initiates a transfer from a linked bank account, before the transfer actually settles, so that legitimate investors do not have to wait days to trade. Between March 2019 and September 2024, according to the SEC, Baviskar initiated $377,200 of unfunded deposits into brokerage accounts, used the instant credit those deposits generated to buy and sell more than $1.4 million in securities, and withdrew $6,078.16 in trading profits. On August 25, 2026, the SEC filed a settled action against him in the Eastern District of North Carolina.
Without admitting the allegations, Baviskar consented to a final judgment, subject to court approval, that would permanently enjoin him from violating Section 10(b) of the Securities Exchange Act and Rule 10b-5, impose a conduct-based injunction, and order him to pay disgorgement of $6,078.16, prejudgment interest of $1,914.41, and a civil penalty of $50,000. The penalty is more than eight times the amount he actually took out. The investigation was conducted by the SEC’s Atlanta Regional Office.
Stop-Payment Orders on Accounts That Had the Money
The detail that separates this from a series of accidental overdrafts is what the SEC says Baviskar did with transfers drawn on accounts that actually had sufficient funds. According to the complaint he did two distinct things. He knowingly initiated transfers from bank accounts that lacked the money to cover them. And, on transfers drawn against bank accounts that did have sufficient funds, he placed stop-payment orders. Either route produced the same result: the brokerage extended instant credit against a deposit that would never arrive, and the deposit was later reversed, either because the broker rejected it for insufficient funds or because Baviskar himself had cancelled it.
The stop-payment orders are the clearest evidence of intent in the case. A bounced transfer can be explained as poor account management. Affirmatively cancelling a transfer that would otherwise have cleared, after the brokerage has already extended credit against it, is a deliberate act. The SEC’s complaint states plainly that the broker-dealers would not have extended instant deposit credit to Baviskar, or allowed him to trade in those accounts at all, had they known his bank transfers would be reversed. The credit was extended on the strength of an assumption he was actively working to defeat.
$1.4 Million in Trading to Extract $6,078
The economics of the scheme are what make it strange. Baviskar moved more than $1.4 million in securities through accounts funded by money that did not exist, sustained the arrangement across nine separate brokerages over five and a half years, and walked away with $6,078.16. That is a profit margin of roughly four tenths of one percent on the trading volume, achieved through conduct that carries a fraud charge. Free-riding schemes tend to produce this pattern, because the trader is not running a strategy with an edge; he is simply trading with borrowed money he never intends to repay, and the market determines the rest. The losses that result do not land on him. They land on the brokerages left holding positions bought with credit that was never funded.
The SEC has pursued a steady line of these cases. In one, four Long Island men ran a $2 million scheme using over 600 accounts, exploiting the same instant deposit feature and abandoning the unfunded accounts once the credit was exhausted, a case this publication covered when final judgments were entered against Christopher Flagg, Daquan Lloyd, and Travis Treusch. In another, a trader made nearly $3.5 million in deposits and transfers from accounts that were closed or empty. In a third, the defendant made bogus deposits exceeding $6.9 million, withdrew about $615,000, and left broker-dealers with more than $3 million in losses. In a fourth, six defendants moved over $2 million in fraudulent transfers to generate $7,864.86 in profits while sticking the brokerages with $146,660.11 in losses. Baviskar’s case sits at the smaller end of that range in profit but at the longer end in duration.
A Conduct-Based Injunction and a Penalty Set Well Above the Gain
The remedy reflects the SEC’s view that the deterrent value of these cases is not in recovering the money. The disgorgement of $6,078.16 returns exactly what Baviskar withdrew. The $50,000 civil penalty is set at more than eight times that figure, a deliberate multiple that signals the penalty is aimed at the conduct rather than the proceeds. The conduct-based injunction, a remedy the SEC has increasingly sought in free-riding cases, typically restricts how and whether the defendant can open brokerage accounts or place trades going forward, often requiring settled cash in the account before any purchase. The rules against free-riding exist to protect the settlement system that lets ordinary investors trade on credit for a few days, a system that only functions if the deposits behind it are real.
Conclusion
Mayur Baviskar spent five and a half years pushing $377,200 of deposits that were never going to clear into brokerage accounts at nine firms, then trading against the credit those deposits bought him. When a transfer would have gone through, he stopped it. He traded more than $1.4 million this way and kept $6,078.16. The brokerages extended the credit because they assumed the money was coming. He now owes that $6,078 back, plus interest, plus a $50,000 penalty, and accepts restrictions on how he can trade in future. The feature he exploited exists so that people who do have the money do not have to wait for it.
