The U.S. Securities and Exchange Commission (SEC) has charged a trader and four firms for what it calls a “brazen and systematic scheme”, which involved more than $850,000 in ill-gotten funds, and more than $2 million in customer compensation.
According to the SEC on Thursday, a trader in Latvia was charged for conducting a widespread online account intrusion scheme in which he manipulated the prices of more than 100 NYSE and Nasdaq securities.
The SEC alleges that Igors Nagaicevs, who has not been served with the charges due to the fact he is overseas, broke into online brokerage accounts more than 150 times over the last 14 months, and drove stock prices up or down by making unauthorized purchases or sales in the hijacked accounts.
“Nagaicevs engaged in a brazen and systematic securities fraud, repeatedly raiding brokerage accounts and causing massive damages to innocent investors and their brokerage firms,” said Marc J. Fagel, Director of the SEC’s San Francisco Regional Office.
To make matters worse, four firms were charged with allowing the transactions, because they did not register Nagaicevs as a legitimate broker. Each of the trading firms provided him online access to trade directly in the U.S. markets through an account held in the firm’s name.
“These firms provided unfettered access to trade in the U.S. securities markets on an essentially anonymous basis,” said Daniel M. Hawke, Chief of the SEC’s Market Abuse Unit.
“By failing to register as brokers, the firms and principals in this case exposed U.S. markets to real harm by evading crucial safeguards of the federal securities laws. We will not allow firms like these to fly under the radar and become safe havens for market abuse.”
Alchemy Ventures, Inc., KM Capital Management, LLC, Zanshin Enterprises, LLC, and Mercury Capital were the firms named by the SEC. Two of the associates working for two of the named firms agreed to settle for $35,000 each in fines.
The SEC’s administrative action will determine whether the non-settling trading firms and principals violated the broker registration provision of the federal securities laws, or whether the non-settling principals aided and abetted and caused the firms’ violations, and what sanctions, if any, are appropriate as a result.
The SEC’s actions occurred on the same day that the Financial Industry Regulatory Authority (FINRA) issued an investor alert and a regulatory notice about an increase in financially motivated attacks targeting email.
