SEC sues hacker for manipulating stock prices

The SEC has accused a Russian man of illegally manipulating share prices

The US Securities and Exchange Commission (SEC) has accused a Russian man of illegally manipulating share prices by hijacking people’s online trading accounts.

Valery Maltsev, who runs a firm called BroCo, is accused of stealing the login details for online share trading accounts and then using them to place orders for stock in which he had already taken a position.

Between August 2009 and December 2009 orders were placed at either a higher or lower price than was publicly quoted, enabling Maltsev to make a profit in two different ways, according to the SEC’s court filing.

“These transactions have created the appearance of legitimate trading activity and have artificially affected the prices of at least 38 issuers,” the Securities and Exchange Commission said in court filing.

“Immediately or shortly thereafter, the defendants capitalised on the artificially inflated share prices of the targeted securities by selling the shares previously acquired in their account.”

The Commission added: “In other instances, the defendants profited by covering short positions previously established in their account while placing unauthorised sell orders through the compromised accounts at substantially lower prices.”

The filing gives details of one such case where the price of stock in Pennsylvania-based financial services company AmeriServe Financial was manipulated using the hacked accounts on 21 December 2009.

On that day share dealing in the company rose twenty-fold as the accounts were ordered to buy stock, which was sold to them by BroCo.

“Broco grossed $141,500 (£92,900) in approximately 15 minutes, realising a net profit of $17,760,” the SEC said. The hacked accounts lost $20,355 in the transactions.

The scheme is estimated to have netted Maltsev $255,532 and cost the people whose accounts had been hacked $603,000. Some people suffered increased losses because Maltsev liquidated their existing holding to buy his shares, the complaint alleges.

A judge has now frozen the assets of BroCo and has stopped the money from being withdrawn.