WASHINGTON/NEW YORK (Reuters) -The U.S. Securities and Exchange Commission on Monday charged two individuals for a fraudulent trading scheme involving so-called "meme stocks" aimed at taking advantage of a surge in retail trading driven by social media in early 2021.

The securities regulator said it charged a Florida resident and his friend for allegedly using a form of market manipulation called wash trading to collect rebate payments from exchanges as retail traders piled into "meme stocks" - stocks being actively promoted on social media.

The SEC said Suyun Gu devised a scheme to illegally profit off of so-called "maker-taker" pricing offered by exchanges, in which resting orders that provide liquidity by executing against other orders receive a rebate payment, by trading options contracts with himself using various brokers.

"In addition to collecting these ill-gotten rebates, the wash-trading scheme allegedly impacted the market as it skewed the volume in certain option contracts and induced other traders to place trades in otherwise illiquid option contracts," the SEC said.

Gu executed around 11,400 trades with himself, netting more than $668,000 in rebates, while his friend, Yong Lee, executed around 2,300 trades with himself, netting more than $50,000 in rebates, the SEC said.

Gu and Lee chose put options on meme stocks that were far out of the money, meaning the strike price was well below the underlying stock price, to trade against themselves because retail interest in those stocks was sending the prices higher, making put options less attractive, the regulator said.

In March, two brokers closed Gu's and Lee's accounts over wash-trading concerns but Gu continued the scheme through mid-April by lying about his trading strategy, using accounts in other peoples names and accessing accounts through virtual private networks to hide his activity, the SEC said.

Attorneys for the individuals did not respond immediately to request for comment.

(Reporting by Chris Prentice and Katanga Johnson in Washington and John McCrank in New York; Editing by Mark Porter)