Securities and Exchange Commission
Securities Exchange Act of 1934
Release No. 48260 / July 31, 2003
File No. 3-11199
In the Matter of Rajan Moondra
Commission Institutes Cease-and-Desist Proceedings against Rajan Moondra for After-Hours Wash Sales Trading Scheme
The Securities and Exchange Commission today issued an order instituting cease-and-desist proceedings against Rajan Moondra. In the Order, the Division of Enforcement alleges that Moondra engaged in a fraudulent trading scheme designed to create artificial tax losses by executing wash sales between taxable and tax-sheltered accounts. The Division specifically alleges that Moondra executed 56 wash sales in the securities of 12 different issuers, and created artificial tax losses of $161,695.
The Division alleges that Moondra effected his wash sales by placing near-simultaneous matching limit orders to buy and sell the same securities in two of the accounts he controlled at the time. His limit orders were processed through the Island ECN, which matched them up and executed the transactions. The Order alleges that Moondra typically executed his wash sales in the after-hours market, and at prices that were away from the prevailing market price. The Division alleges that Moondra placed most of his matching limit orders after the close of the regular market because he knew there was less volume in the after-hours market, and thereby wanted to increase the likelihood that his matching limit orders would be paired and executed together.
The Division alleges that Moondra's wash sales operated as a fraud or deceit concerning the nature of the market for each of the securities he used in his scheme. Moondra's wash sale transactions, along with the artificial prices at which they were traded, were typically reported to the market. As reported, his wash sales created a false appearance of market activity with respect to both the trading volume and value of the stocks he used in his scheme.
The Order seeks a determination as to whether Moondra should be ordered to cease and desist from violating the antifraud provisions contained within Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.
Also today, the Commission instituted settled cease-and-desist proceedings, and filed a settled federal court action, against two other persons with respect to a similar wash sales scheme. SEC v. Dwarka P. Rathi and Charles H. Pennington, Civil Action No. 03CV01617 (JR) (filed July 31, 2003); Litigation Release No. 18266 / July 31, 2003; In re Dwarka P. Rathi and Charles H. Pennington, Administrative Proceeding No. 3-11200 (filed July 31, 2003).
The Commission wishes to thank the NASD and the Department of Justice, Tax Division for their cooperation and assistance in this matter.