It is a scam artist with the following proposition:
"Send me $500 to invest in company xxx which I know is going to go up shortly. When I have proven I can make you money, we can do buiness in a bigger way. "
Q: What do you get out of it?
A: If you make money, I get only 2%. That's reasonable ins't it?
So, the scam is, he buys various stocks and assigns the buys and sells to his customers at his discretion. He assigns profitable trades to new customers he is trying to sucker in, and assigns unprofitable trades to customers who have got suckered in big time and says "sorry- let's try again".
He gets 2% of a win and loses nothing on a loss, so the wheel is tilted in his favor.
He is in violation of CFR 240 15C3-3 "Care and custody of customer securities" among other laws.