The US Securities and Exchange Commission on Wednesday revealed that it had won an emergency court order freezing assets in a Latvian-based bank's trading account, which were being used to conduct a hi-tech market manipulation scheme.
The Commission's enforcement action is the third filed in as many months involving market manipulation schemes conducted through online account intrusions.
In an emergency federal court action filed in the United States District Court for the District of Columbia, the Commission alleged that the account, maintained by relief defendant JSC Parex Bank based in Riga, Latvia, had been used by one or more unknown offshore sub-account holders to launch a "pump and dump" manipulation scheme involving the stocks of fifteen different public companies.
As part of the scheme, the unknown traders hacked into unsuspecting investors' online brokerage accounts at seven different brokerage firms, selling off investors' positions and using the proceeds to pump up the market for the stocks subject to the scheme.
Through this technique, the unknown traders generated at least $732,941 in illicit profits and cost US brokerages some $2 million in losses.
In response to the Commission's motion, the Court on Tuesday issued a temporary restraining order freezing the defendants' fraudulent profits, which were held in JSC Parex's omnibus trading account.
SEC Office of Internet Enforcement Chief, John Reed Stark observed that:
"Using sophisticated computer hacking and identity theft techniques to break into the accounts of innocent online brokerage customers, these perpetrators effectively cut out the middleman of the old fashioned pump-and-dump scheme, eliminating phony stock promotions, creating their own artificial trading demand, and consummating their frauds in as little time as a couple of hours."
SEC Enforcement Deputy Director Peter Bresnan also commented, announcing that:
"In today's global economy, where con artists can misuse computer technology to defraud innocent US investors from far beyond our borders, freezing the unlawful profits of those behind these intrusion schemes is especially important. Working to prevent injury to US investors from intrusions into online brokerage accounts is a top priority of the Enforcement Division."
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