U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21122 / July 9, 2009
Securities and Exchange Commission v. Pointer Worldwide, Ltd et al., Civil Action No. 09-CV-6162 (S.D.N.Y.)
SEC SUES RUSSIAN-BASED POINTER WORLDWIDE AND TATIANA BADMAEVA IN ONLINE INTRUSION SCHEME INVOLVING NYSE AND NASDAQ TRADED STOCKS
The United States Securities and Exchange Commission today filed a complaint in the United States District Court for the Southern District of New York charging Russian entity Pointer Worldwide Ltd and its officer, Tatiana Badmaeva, with participating in a fraudulent scheme to manipulate the prices of four New York Stock Exchange and Nasdaq traded securities through the unauthorized use of innocent victims' online brokerage accounts.
The complaint alleges that between June 18, 2008 and June 20, 2008, Badmaeva, or others acting in concert, commandeered the online trading accounts of unwitting investors at various broker-dealers, liquidated existing equity positions and, using the resulting proceeds, purchased shares in four publicly traded companies. The unauthorized purchases created the appearance of legitimate trading activity, thereby inducing others to trade the securities and driving up the price and volume of these stocks. The complaint further alleges that in each of these instances, Badmaeva's trading pattern was similar. In some instances, Badmaeva first accumulated in her own account a position in one of the issuers. Next, a series of unauthorized electronic intrusions involving that issuer occurred at one or more broker-dealers whereby the intruders liquidated existing positions in the accounts and used the resulting proceeds to buy thousands of shares of the same stocks previously purchased by Badmaeva in her own account. Then, at the height of the pump, Badmaeva sold her shares at the inflated prices for a profit. In other instances, Badmaeva engaged in short sales, timing her covers by taking advantage of the lower prices following the intrusions.
The complaint further alleges that the Pointer Worldwide account, which is beneficially owned by Badmaeva, was the only account that traded in all four of these securities on the dates of the intrusions. Moreover, the account, which was opened just one week before the intrusions began and closed shortly thereafter, traded in only these four securities. In just three days of trading involving a combination of buys, sales and short sales, Pointer Worldwide and Badmaeva generated a net profit of $33,113.75 trading in the four securities.
The Commission's action charges Pointer Worldwide and Badmaeva with violations of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and seeks permanent injunctive relief, disgorgement and civil money penalties.
The SEC's Office of Investor Education and Assistance has previously issued an investor alert, available on the SEC's website, which provides tips for avoiding becoming a victim of an online intrusion. See http://www.sec.gov/investor/pubs/onlinebrokerage.htm.
The Commission would like to thank the Financial Industry Regulatory Authority (FINRA) for its assistance in this matter.