SEC freezes assets of unknown Eastern European scammers in pump-and-dump scheme

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A federal judge acted last week to freeze $3 million in assets from a Latvian-based bank's U.S. trading account allegedly belonging to an Eastern European crime ring.

The syndicate is accused of orchestrating what the Securities and Exchange Commission (SEC) is calling "a modern-day, technological version of the traditional ‘pump-and-dump' market manipulation scheme." 

The freeze was granted by the U.S. District Judge Ricardo Urbina at the request of the SEC pending a preliminary hearing. It stems from an SEC investigation that uncovered a group of foreign-based fraudsters who allegedly hacked into online brokerage accounts from seven different firms, sold off the stocks held within those accounts and funneled the profit from these sells to purchase stock from 15 pre-selected NASDAQ firms in order to manipulate the market.

Investigators with the SEC said that the unknown criminals had bought into these "thinly-traded" stocks prior to the intrusion and made over $732,000 in profit by selling off their shares once their purchases with the stolen money pumped up their selected stocks temporarily. The illegal actions cost the brokerages over $2 million in losses.

The perpetrators of the scheme are unknown, according to the SEC.

“In perpetrating their scheme, the defendants masked their identities by intruding into the online accounts using the IP addresses of innocent third parties and by trading anonymously through the domestic brokerage accounts of Latvian-based Relief Defendant JSC Parex Bank,” SEC lawyers wrote in their official complaint.

Now that the assets are frozen, the SEC has asked the court to order Parex Bank to hand over the frozen $3 million as part of a collection of ill-gotten gains, as well as prejudgment interest and civil penalties.

Click here to email West Coast Bureau Chief Ericka Chickowski.

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