SEC Withholds Assets of Russian Hacker

By the order of Securities and Exchange Commission (SEC), a company in Estonia has its assets frozen. The owner of the company, a Russian man was blamed for illegally accessing accounts and embezzling the stocks.

On December 21, 2006 a New York federal court honored SEC's request to freeze Evgeny Gashichev and his Estonian company, Grand Logistic S.A.'s accounts. The court has told Gashichev that he must return the money he withdrew from the United States.

Gashichev and his company are culprits of operating a sophisticated version of a 'pump-and-dump' scam. They were found to place fake purchase orders of company stocks through the online brokerage accounts of the unsuspecting victims. This resulted in an artificial rise of the security prices, which they had originally bought at much cheaper rates from their own account. The SEC believes that Gashichev illegally accessed his victims' online accounts and used their funds to pay for his investments.

As per the accusation, unlike using a traditional pump-and-dump scheme where the fraudster floats false and misleading statements on the online market place, Gashichev applied more direct methods. He accessed the online brokerage accounts of his victims from where he placed huge purchase orders of securities without the accountholders' knowledge. This created a buying frenzy, which fraudulently raised the value of the securities.

Gashichev run this scam over seven weeks between August and October 2006 making illegal profits of $353,609 with the help of 25 different scams.

As per SEC's filing, it admitted that while there were only circumstantial evidence against Gashichev, the explanation for the manner and timing of Gashichev's trading operation and the mismatch with the intruded accounts cannot be considered innocent. Gashichev traded on 25 occasions and won each of them while the victimized accountholders always lost.

The SEC has prosecuted account intruders in the past, which resulted in a conviction and a 13-month jail detention in 2004 for instance; but the agency did not foresee results from closing this latest scam. The SEC said that although it has stopped Gashichev's transactions through his company account but the possibility of frauds can't be ruled out.

Related article: SEC Imposes Trading Ban on 35 Companies

» SPAMfighter News - 12/30/2006