SEC Freezes Assets of Pump-and-Dump Schemer
The SEC said that it obtained an emergency asset freeze against Grand Logistic and its operator, Evgeny Gashichev, via a federal court action filed in the United States District Court for the Southern District of New York. The action was taken in the name of halting the Estonia-based outfit from continuing its operations, which the SEC said involved the execution of a complex brokerage account manipulation scheme.
Such pump and dump tactics have become increasingly widespread as hackers use compromised brokerage trading accounts to touch off interest in a particular stock, and then attempt to manipulate share prices for profit. The attacks typically involve attempts to drum up interest in penny stocks which criminals have purchased beforehand and can sell at a higher price once trading in the shares has been successfully generated.
The SEC claims that Grand Logistic targeted online brokerage accounts in the U.S. with the purpose of manipulating financial markets and charged Gashichev, a Russian national, with conducting a fraudulent scheme involving the alteration of the prices of numerous stocks. The agency alleges that between Aug. 28 and Oct. 13, Grand Logistic and Gashichev made $353,609 in unlawful profits via at least 25 different account intrusions involving the trading accounts of 21 companies.
In addition to freezing the defendants assets and seeking further civil penalties, as well as a shutdown of Grand Logistics business operations, the claim won by the SEC orders the repatriation of any funds taken out of the U.S. by Gashichev.
The complaint contends that Gashichev purchased shares of small, thinly-traded companies with low stock prices through an online trading account he opened in the name of Grand Logistic at an Estonian financial services company. Within minutes of his initial share purchases, the SEC claims Gashichev would use stolen usernames and passwords to gain unauthorized access to other online brokerage accounts to buy more of the stock and drive up its share price.
The SEC said that the defendant also attempted to use electronic means to cloak his identity and conceal the manner in which he infiltrated the compromised brokerage accounts. After pushing a stocks price up, the value of the shares invariably fell sharply, and the victims suffered losses in their accounts, according to the filing.
"Recently, the SEC has become aware of a dramatic increase in the number of intrusions into online brokerage accounts," Daniel M. Hawke, district administrator of the SECs Philadelphia District Office, said in a statement. "We have been working closely with other regulators and brokerage firms in an effort to ensure that online brokerage trading is safe and secure; todays action shows that the Commission will aggressively pursue individuals and entities who seek to harm innocent investors through such conduct."
The SEC noted that in most cases of similar pump-and-dump attacks, brokerage firms are covering the costs of any intrusion-related losses for their customers.
In November, researchers identified the proprietors of a massive network of compromised computers, or a botnet, as being responsible for generating millions of e-mails that attempted to generate interest in penny stocks in another type of pum-and-dump scam. The group is believed to be made up of Russian hackers who control tens of thousands of hijacked computers worldwide.