U.S. securities regulators Thursday charged a trader in Latvia with carrying out an online account intrusion scheme, and it accused four electronic trading firms and eight executives with providing the trader with unfiltered market access.
According to a complaint filed by the U.S. Securities and Exchange Commission in federal court in San Francisco, Igors Nagaicevs broke into online brokerage accounts of customers at large U.S. broker-dealers and drove stock prices up or down by making unauthorized trades in the hijacked accounts. It claims that this occurred on more than 150 occasions over the course of 14 months, and allowed him to generate more than $850,000 in illegal profits. The allegations have not been proven.
Additionally, according to the SEC’s orders instituting administrative proceedings against the four electronic trading firms, the firms allowed Nagaicevs to trade through their electronic platforms without first registering as brokers. Each of the trading firms provided him online access to trade directly in the U.S. markets through an account held in the firm’s name, the SEC says.
“These firms gave Nagaicevs a gateway to the U.S. securities markets while circumventing the protections of the federal securities laws, including requirements for brokers to maintain and follow adequate procedures to gather information about customers and their trading,” it says.
One of the accused firms and two executives have agreed to settlements in which they consented to SEC orders finding that they violated the rules, and the executives each agreed to pay a $35,000 penalty. The others are still facing SEC action, and the allegations have not been proven in their cases.