The US Securities and Exchange Commission this week announced charges against 18 individuals and entities for their roles in a pump-and-dump scheme that involved account hacking.
As part of the scheme, the participating individuals allegedly conspired with others to hack into tens of online retail brokerage accounts to manipulate the prices of specific stocks.
Specifically, the individuals purchased shares of the common stock of public microcap companies Lotus Bio-Technology Development Corp. (LBTD) and Good Gaming, Inc. (GMER), then used the hacked accounts to artificially increase the prices of these shares by making large purchases of the same stock.
According to the SEC, the defendants then proceeded to sell their shares at the inflated prices, “generating approximately $1.3 million in proceeds and creating substantial profits.”
In a complaint filed on Monday, SEC claims that more than 30 US retail brokerage accounts were hacked as part of the scheme.
The defendants, which are Canadian, US, and UK nationals, were organized in two overlapping groups, SEC says.
According to the Commission, Christophe Merani, Rahim Mohamed, Zoltan Nagy, Robert Seeley, Phillip Sewell, Christopher Smith, Richard Smith, Anna Tang, Richard Tang, Breanne Wong, and Davies Wong, along with entities they controlled, purchased large blocks of LBTD common stock constituting most of the outstanding shares, but concealed their interest in the company.
SEC also claims that Jeffrey Cox, Glenn Laken, Rahim Mohamed, and Richard Tang, transferred shares of GMER common stock to an offshore brokerage account, to hide Laken’s indirect ownership of the stock.
Shell companies controlled by the defendants include Avatele Group LLC, Harmony Ridge Corp., H.E. Capital SA, Maximum Ventures Holdings LLC, and POP Holdings Ltd.
In August and September 2017, using hacked brokerage accounts, the defendants purchased large quantities of LBTD shares to inflate their price. The same was done for GMER stock in January 2018.
At virtually the same time as the hacks, the defendants sold blocks of the two respective microcap companies at the artificially inflated prices, SEC says. Mohamed allegedly coordinated the hacking attacks.
“Our complaint details a brazen and sophisticated scheme, with hackers using international accounts and dummy account holders to hide their tracks. As this case demonstrates, the Division can uncover misconduct even when it crosses borders and is concealed behind multiple layers of obfuscation,” SEC director Nekia Hackworth Jones said.
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