Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

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Tuesday, March 16, 2010

SEC Obtains Freeze on Russian Defendants' Assets in Online Intrusion Scheme

On Monday, March 15, 2010, the SEC obtained a freeze on the assets of Russian defendants allegedly responsible for a hi-tech market manipulation scheme. According to the SEC, BroCo Investments, Inc. and its president Valery Maltsev hijacked the online brokerage accounts of unwitting investors using stolen usernames and passwords and subsequently placed unauthorized trades through the compromised accounts to manipulate the markets of at least thirty-eight issuers between August 2009 and December 2009. In almost every instance, prior to intruding into these accounts, the Defendants acquired positions in their own account. Then, just minutes later, without the accountholders' knowledge, the Defendants, and/or individuals acting in concert with them, placed scores of unauthorized buy orders at above-market prices using the compromised accounts. After these unauthorized buy orders were placed, the Defendants sold the positions held in their own account at the artificially inflated prices. In other instances, the Defendants profited by covering short positions previously established in their account while placing unauthorized sell orders through the compromised accounts at substantially lower prices. This illicit account activity artificially affected the share price and trading volume for each of the thinly-traded issuers and enabled the Defendants to sell their holdings at a substantial profit, realizing at least $255,532 in ill-gotten gains.

http://lawprofessors.typepad.com/securities/2010/03/sec-obtains-freeze-on-russian-defendants-assets-in-online-intrusion-scheme.html

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