Judge gavel, scales of justice and law books in court

U.S. law enforcement announced that a former day trader has pleaded guilty for his role in a novel stock manipulation scheme that involved hacking into online brokerage accounts.

In a U.S. federal court in Brooklyn, Joseph Willner pleaded guilty on Tuesday to conspiring to commit securities fraud and illegally profiting from manipulative trading involving more than 50 hacked online brokerage accounts.

According to court filings in the case, between September 2014 and May 2017, Willner placed short orders for various stocks at artificially high prices, while his co-conspirators hacked into online brokerage accounts and placed matching buy orders. They then re-purchased the stocks from the victims’ accounts at market, or below-market, prices.

“This sequence of fraudulent trades usually took place within minutes, and Willner immediately profited based on the difference between his artificially high short sale price and the lower price at which he re-purchased the stock,” U.S. authorities explained.

As a result, they say, affected brokerage firms lost more than US$2 million.

“Willner and his co-conspirators used computer hacking to take the pump out of pump and dump, eliminating the need to trick investors into buying artificially inflated stock by simply hacking into brokerage firm accounts and having them buy the stock unbeknownst to the brokerage firms,” said Richard Donoghue, U.S. attorney for the Eastern District of New York.

“While the approach was novel, the end result was all the same, with the defendant being held accountable for his criminal acts,” he added.

Willner faces up to five years in prison, along with monetary sanctions.