US$3m frozen after pump-and-dump hacking

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A US federal judge froze US$3 million in assets from a Latvian bank's US trading account accused of orchestrating what the Securities Exchange Commission (SEC) is calling "a modern-day, technological version of the traditional ‘pump-and-dump' market manipulation scheme."

The freeze stems from an SEC investigation that uncovered a group of foreign-based fraudsters who allegedly hacked into online brokerage accounts from seven different firms.

Then sold off the stocks held within those accounts and funneled the profit from these sells to purchase stock from 15 pre-selected NASDAQ firms in order to manipulate the market.

Investigators with the SEC claim that the unknown criminals had bought into these ‘thinly-traded’ stocks prior to the intrusion and made over US$732,000 in profit.

They sold off their shares once their illegimate purchases pumped up their selected stocks temporarily. The illegal actions cost the brokerages over US$2 million in losses.

The perpetrators of the scheme remain unknown, the SEC reported.

“In perpetrating their scheme, the defendants masked their identities by intruding into the online accounts using the Internet Protocol addresses of innocent third parties.

Furthermore, they traded anonymously through the domestic brokerage accounts of Latvian-based Relief Defendant JSC Parex Bank,” SEC lawyers wrote in their official complaint.

Now that the assets are frozen, the SEC is asking the court to order Parex Bank to hand over the frozen US$3 million, as part of a collection of ill-gotten gains as well as prejudgment interest and civil penalties.
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