University of Georgia. (Photo: John Disney/ALM)

A federal judge in Athens has issued an injunction freezing the bank accounts of a newly-minted University of Georgia graduate accused of running a Ponzi scheme out of his fraternity house, according to federal court papers.

District Judge Clay Land's June 4 order also froze bank accounts associated with what the U.S. Securities and Exchange Commission claims were two bogus hedge funds created by Syed Arbab, 22, that allowed him to defraud friends, fellow students and alumni of nearly $270,000.

Land issued the court order after Arbab signed a consent agreement with the SEC promising to supply investigators with an accounting of all funds received by him or his hedge funds.

Land noted in his order that Arbab's agreement with the SEC is more far-reaching than a standard TRO and that Arbab appears to have agreed to it without having retained counsel for himself or the hedge funds he created, which are also defendants in the SEC's civil suit.

Judge Clay Land, U.S. District Court for the Middle District of Georgia (Courtesy photo)

Because of that, Land said that, if Arbab reconsiders any of the conditions, he or the funds will be allowed to file a motion to modify the consent order.

Arbab was apparently living at UGA's Phi Kappa Tau fraternity house when he began marketing investments in two allegedly bogus hedge funds he created last year, according to civil papers filed in federal court in Athens by the SEC.

Beginning his junior year, Arbab marketed himself online as a partner and the chief investment and financial officer of Artis Proficio Capital Investments and Artis P. Capital Management, the SEC said in a civil suit and a motion for a temporary restraining order meant to stop Arbab from continuing to solicit more money, even as the SEC was investigating him.

Arbab often solicited investments through text messages, boasting of annual returns as high as 56% and relying on word-of-mouth praise from early investors, according to the SEC and affidavits from three investors who lost money.

But instead of investing the money, Arbab allegedly diverted tens of thousands of dollars to party at adult nightclubs, hosted gambling trips to Las Vegas and channeled funds into his own brokerage accounts, including one where his personal trading losses exceeded $300,000, according to the SEC.

As some of Arbab's early investors began asking to collect promised returns on their investment or reclaim their initial investments, the college student allegedly arranged to pay them back by having new investors forward some or all of their funds directly to other investors via smartphone applications in what the SEC contends was a classic Ponzi scheme.

The office of Georgia's secretary of state dissolved Artis Proficio Capital Investments in April.

But the SEC insisted its investigators have found no evidence of any brokerage account in the name of Arbab's two alleged hedge funds. The SEC also said in court papers that, although Arbab told investigators the funds' custodian was Merrill Lynch, the SEC subsequently learned that Merrill Lynch never had any relationship with Arbab, nor had any account existing in the name of either of Arbab's funds.

Arbab is currently representing himself in the federal case.

In signing the consent agreement, Arbab neither admitted nor denied the SEC's allegations.

He also agreed to provide the SEC with the names and contact information of each investor, the amount that was invested, how much Arbab may have paid or channeled to them through other investors and other pertinent financial information.

While the SEC, so far, has only been able to confirm $269,000 Arbab secured from eight investors, Arbab told SEC investigators during an April interview that he raised more than $2 million, and a weekly spreadsheet he sent out included more than 110 investor account listings, the SEC contends.

Arbab also has agreed not to destroy or otherwise dispose of documents associated with his security sales or any electronic devices he used to conduct transactions. The agreement also bars Arbab from either directly or indirectly buying or selling securities.

Arbab also agreed not to make any false or misleading statements to current or potential investors about how he and his companies used investor funds, about expected rates of return or his educational background.

While marketing his hedge funds, Arbab told potential investors he already had an undergraduate degree and was studying for a master's degree in business administration at UGA's Terry School of Business. But, the SEC said in court papers that Arbab was still an undergraduate majoring in cellular biology and genetics and never enrolled in UGA's MBA program.

Arbab 's LinkedIn page says he finished UGA this year with a bachelor's degree in cell biology and anatomy.

Arbab was still soliciting new investors as recently as May 17, according to the SEC.