The Securities and Exchange Commission (SEC) has frozen the U.S. assets of a Russian businessman accused of hacking into stockholders' online accounts as part of a "pump-and-dump" scheme.
The SEC charged Evgeny Gashichev and his company, Grand Logistic, S.A., a Belize corporation operating out of Tallinn, Estonia, with conducting a fraudulent scheme involving the manipulation of stock prices by the unauthorized use of online brokerage accounts.
The agency obtained an emergency asset freeze against Grand Logistic in U.S. District Court for the Southern District of New York.
The commission charged that Gashichev and his company made more than $350,000 through at least 25 separate account manipulations - involving the securities of at least 21 companies - from Aug. 28 to Oct. 13.
Gashichev and Grand Logistic are charged with violating Section 10(b) of the Securities Exchange Act of 1934. The agency is seeking permanent injunctions against the firm, forfeiture of ill-gotten gains, prejudgment interest and civil penalties.
Contact information for Grand Logistic could not be obtained.
Gashichev allegedly purchased shares of small companies with low stock prices through an online account belonging to Grand Logistic, then used stolen usernames and passwords to hack into other accounts and spike the price of the stock he had just purchased. He sold his shares - then surging in value - at a profit, according to the SEC's complaint.
In the process, share prices of the manipulated stocks fell sharply, resulting in financial losses for the hacking victims.
Daniel M. Hawke, district administrator for the SEC's Philadelphia office, said in a news release that the commission has seen a spike in online account hackings.
"Recently, the SEC has become aware of a dramatic increase in the number of intrusions into online brokerage accounts. We have been working closely with other regulators and brokerage firms in an effort to ensure that online brokerage trading is safe and secure," he said. "Thus far, brokerage firms are typically covering the intrusion-related losses of their customers."
Ethiopis Tafara, director of the commission's Office of International Affairs, said in a news release that the SEC is making its partners around the globe aware of pump-and-dump scams.
"We are working with our colleagues in Estonia and elsewhere around the world to heighten awareness of this new form of fraud and help ensure that those engaged in this illegal activity do not use international borders to escape detection and prosecution," he said.
The SEC Office of Investor Education and Assistance has published an investor alert, available on the commission's website. Various federal agencies have also issued a consumer advisory on online investing.
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