SEC Obtains Default Judgment Against Russian National for Defrauding Investors Out of Millions of Dollars in Phony Certificates of Deposit Scam
Litigation Release No. 25247 / October 26, 2021
Securities and Exchange Commission v. Denis Georgiyevich Sotnikov, et al., No. 1:20-cv-02784 (DNJ filed March 13, 2020)
On October 15, 2021, the U.S. District Court for the District of New Jersey entered a final judgment against Denis Georgiyevich Sotnikov and entities he controlled for participating in a fraudulent scheme to lure U.S. investors into buying fake Certificates of Deposit (CDs) promoted through internet advertising and "spoofed" websites that mimicked the actual sites of legitimate financial institutions.
As alleged in the SEC's complaint, filed on March 13, 2020, the scheme involved purchasing internet ads that targeted investors who were searching for CDs with above-market 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. The complaint alleged that, 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 purported clearing partners were allegedly entities used by Sotnikov and other participants in the scheme to launder and misappropriate millions of dollars in investor funds. The complaint also alleged that several relief defendants received misappropriated investor funds, including Sotnikov's wife, Natalia Aleksandrovna Mazitova, and several entities they controlled.
The judgment, entered after defendants and relief defendants defaulted, determined that Sotnikov and the entities he controlled - Adaptive Technology LLC, AGQ Business Group LLC, ATL Business Group LLC, BO&SA Corporation, DN Industrial LLC, and Expert Digital LLC - violated the anti-fraud provisions 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 permanently enjoins them from further violations. The judgment requires Sotnikov and the entities he controlled to collectively pay $2,628,260 in disgorgement, plus prejudgment interest. The judgment also requires Sotnikov to pay a civil penalty of $2,535,611 and requires each entity that he controlled to pay a separate $975,230 civil penalty. Finally, the judgment requires Mazitova and the other relief defendants to collectively pay $1,277,900 in disgorgement, plus prejudgment interest.
The SEC's investigation was led by Elizabeth Doisy, Douglas McAllister, Carlisle Perkins, and Martin Zerwitz, with assistance from Donato Furlano, and supervised by Paul Kim and Deborah Tarasevich of the SEC Enforcement Division's Cyber Unit. The litigation was led by John Bowers and James Connor, and supervised by Tom Bednar.