Securities Law Prof Blog

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

Thursday, December 2, 2010

SEC Settles Account Intrusion Scheme Charges

The SEC, on December 2, 2010, settled civil charges against BroCo Investments, Inc. and its president Valery Maltsev arising out of an account intrusion scheme that manipulated the shares of over 100 public companies.  The SEC alleged that BroCo and Maltsev controlled an omnibus account that was used to turn $2,080 into $627,633 in a six-month period by repeatedly buying and selling securities contemporaneously with unauthorized trades that had been placed in compromised accounts at various U.S. broker-dealers.  BroCo and Maltsev ignored several red flags that should have alerted them to the fraudulent activity including the massive short term trading gains being realized in the account, internal memoranda that identified the suspicious trading, and the constant repatriation of funds.

In settling the SEC’s charges without admitting or denying the allegations, BroCo agreed to pay $627,633 in disgorgement plus prejudgment interest and a $627,633 penalty. In settling the SEC’s charges without admitting or denying the allegations, Maltsev agreed to pay a $50,000 penalty and consented to the entry of a judgment that permanently enjoins him from violating Sections 17(a)(2) and (3) of the Securities Act of 1933. Both settlements are subject to court approval.

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