SEC Charges Day Trader with Price Manipulation Scheme

The SEC charged a day trader for manipulating the prices of hundreds of securities through a fraudulent trading scheme. 

In the Complaint, filed in the U.S. District Court for the Southern District of New York, the SEC alleged that over a three-year period, the trader executed a three-step manipulation scheme in thinly traded securities. The SEC alleged that (i) the trader placed large numbers of small-lot market orders to artificially drive up a security's price, (ii) then placed limit buy orders he had no intention of filling to create a false appearance of continued buying interest, and (iii) sold his shares at the inflated price before canceling the fake limit orders. The SEC further alleged that the trader repeated this pattern more than one thousand times across more than 400 securities, and that when broker-dealers warned him to stop and ultimately restricted or closed his accounts, he continued the scheme through (i) accounts held in the name of an estranged family member - opened without that person's knowledge - and (ii) through a friend who agreed to allow the trader to use his name.

The SEC alleged the scheme generated more than $5 million in illicit profits.

The SEC alleged violations of SA Section 17(a)("Fraud in the Offer or Sale of Securities"), SEA Section 9(a)(2)("Market Manipulation"), SEA Section 10(b) ("Use of Manipulative and Deceptive Devices") and Rule 10b-5 ("Fraud in the Purchase or Sale of Securities").

The SEC said it seeks a permanent injunction, disgorgement of ill-gotten gains with prejudgment interest, civil monetary penalties, and a bar preventing the trader from opening or trading in any brokerage account - in his name or any other person's - without first providing the relevant broker-dealer a copy of the complaint and any final judgment.