U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21452 / March 16, 2010
Securities and Exchange Commission v. BroCo Investments and Valery Maltsev, Civil Action No. 10-CIV-2217 (S.D.N.Y.)
SEC OBTAINS ORDER FREEZING ASSETS OF RUSSIAN INDIVIDUAL AND ENTITY SUSPECTED OF CONDUCTING ACCOUNT INTRUSION SCHEME
On Monday, March 15, 2010, the United Securities and Exchange Commission filed an emergency action in the United States District Court for the Southern District of New York to freeze the assets of Defendants, located in Russia, responsible for a hi-tech market manipulation scheme. The Honorable Richard J. Holwell, granted the Commission's request to freeze the Defendants' assets pending a preliminary hearing, including an account that holds assets in excess of $500,000.
The Commission's complaint alleges that BroCo Investments, Inc., its president Valery Maltsev, and/or individuals acting in concert with them 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.
The Commission's complaint further alleges that the Defendants violated Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and seeks permanent injunctions against future violations by the Defendants and disgorgement of all ill-gotten gains, including prejudgment interest and civil 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 acknowledges the assistance of FINRA and the NYSE in this matter.
See Also: SEC Complaint