In today’s digital world, most trading is done, in some way, online. So, it is no surprise that account hijacking is the most recent type of securities fraud on the lips of every broker and securities attorney.
Just this past Thursday, January 26th, Igors Nagaicevs, Latvian trader, was charged with breaking into online brokerage accounts and making unauthorized purchases and sales in order to drive stock prices up or down. The Latvian made over 150 fraudulent transactions 14 months. The SEC says Nagaicevs used these transactions to manipulate the prices of over 100 NYSE and Nasdaq securities, costing US brokerage firm investors more than $2 million in losses and making for himself $850,000 in illegal profits.
The SEC says Nagaicevs was able to get away with securities fraud for so long because he had the aid of four different unregistered electronic trading firms, all located within the US. They are:
- Alchemy Ventures, Inc. of San Mateo, Calif.
- KM Capital Management, LLC of Philadelphia
- Zanshin Enterprises, LLC of Boise, Idaho
- Mercury Capital of La Jolla, Calif.
These firms ignored regulations about broker registration, and gave Nagaicevs full access to trade through their electronic platforms without first registering as brokers themselves. Then, each firm gave him access to make trades in US markets through the firm’s account. This made Nagaicevs’ trades mostly anonymous. Daniel M. Hawke, Chief of the SEC’s Market Abuse Unit said, “By failing to register as brokers, the firms and principals in this case exposed U.S. markets to real harm by evading crucial safeguards of the federal securities laws.”
The most important thing to note about this story is that unregistered firms gave an unregistered broker unlimited access to trade in US markets. While dealing with an unregistered broker or brokerage firm does not guarantee you will be the victim of securities fraud, sidestepping rules of registration is often times the least of your worries when dealing with unregistered brokers. You must always protect yourself by researching the registration and complaint history of the broker, firm and investment before you invest!
S. David Anton is a member of Public Investors Arbitration Bar Association (PIABA) the preeminent national wide organization of attorneys who represent brokerage firm customers in disputes with the industry. He is also a Certified Securities Arbitrator with the Financial Industry Regulatory Authority (FINRA), formerly NASD and resolves disputes between investors and stockbrokers, investment advisers and their firms. He has been practicing law since 1985 and representing brokerage firm customers since 1999. He is a Tampa, Florida based attorney who can handle securities arbitration anywhere in the U.S.