SEC Charges Russian National for Defrauding Older Investors of Over $26 Million in Phony Certificates of Deposit Scam
Litigation Release No. 24770 / March 16, 2020
Securities and Exchange Commission v. Denis Georgiyevich Sotnikov, et al., No. 1:20-cv-02784-RMB-JS (D.N.J. filed March 13, 2020)
The Securities and Exchange Commission on March 13, 2020 charged Denis Georgiyevich Sotnikov and entities he controlled for allegedly participating in a fraudulent scheme to lure U.S. investors into buying fictitious Certificates of Deposit (CDs) promoted through internet advertising and "spoofed" websites that mimic the actual sites of legitimate financial institutions.
According to the SEC's complaint, the scheme involved purchasing internet ads that targeted investors who were searching for CDs with high rates. The ads allegedly included links to phony websites, which falsely claimed that the firms offering the CDs were members of FINRA and the FDIC, and that deposits were FDIC-insured. When investors called the phone number on the websites, an "account executive" impersonating a real registered representative directed investors to wire funds to so-called "clearing" partners. These alleged clearing partners were entities used by Sotnikov to launder and misappropriate investor funds. Since November 2014, the alleged scheme involved spoofing the websites of at least 24 actual financial firms or using at least 8 fictitious entities, resulting in over $26 million in known investor losses - with many of those losses from older investors who used their retirement savings.
The SEC's Office of Investor Education and Advocacy previously issued an investor alert cautioning investors to be aware of spoofed websites offering phony CDs.
In a parallel action, the U.S. Attorney's Office for the District of New Jersey today announced related criminal charges and are pursuing asset seizures.
The SEC's complaint, filed in federal court in the District of New Jersey, charges Sotnikov, Adaptive Technology LLC, AGQ Business Group LLC, ATL Business Group LLC, BO&SA Corp., DN Industrial LLC, and Expert Digital LLC with violating the antifraud provisions of 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 Sotnikov with aiding and abetting those violations. The SEC seeks permanent injunctive relief and the return of allegedly ill-gotten gains with prejudgment interest and penalties. The complaint also names Sotnikov's wife Natalia Mazitova as well as Great Imperial LLC, HRC Clearing House LLC, and Inteko Cargo LLC as relief defendants.
The SEC's investigation, which is ongoing, has been conducted by Carlisle Perkins, Douglas McAllister, and Elizabeth Doisy as well as Deborah Tarasevich, Paul Kim, and Martin Zerwitz of the SEC Enforcement Division's Cyber Unit. Donato Furlano and Peter Rosario assisted with the investigation. The investigation was supervised by Anita Bandy and Kristina Littman. Thomas Bednar and John Bowers are leading the SEC's litigation. The SEC appreciates the assistance of the U.S. Attorney's Office for the District of New Jersey, the Federal Bureau of Investigation, and the Financial Industry Regulatory Authority.