Securities Regulation Daily Cyber unit focused on retail account fraud
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Tuesday, October 31, 2017

Cyber unit focused on retail account fraud

By Mark S. Nelson, J.D.

The SEC charged day trader Joseph Willner with violating the antifraud and antimanipulation provisions of the federal securities laws for illegally commandeering others’ trading accounts and then trading for his own account based on price changes in numerous companies stocks that had been generated by trades placed in the commandeered accounts. The SEC seeks permanent injunctive relief, disgorgement, and a civil money penalty against Willner; the SEC also noted similar federal criminal charges brought against Willner (SEC v. Willner, October 30, 2017).

Stephanie Avakian, Co-Director of the SEC’s Division of Enforcement, emphasized that the SEC is committed to pursuing cases involving cyber-threats to investors. "Account takeovers are an increasingly significant threat to retail investors, and it is exactly the type of fraud our new Cyber Unit is focusing on," said Avakian. The Enforcement Division created the cyber unit a month ago to target a variety of threats, including "[i]ntrusions into retail brokerage accounts."

According to the SEC’s complaint, Willner started communicating with a person known only as Individual A via direct messaging applications in fall 2014. Although Willner used a pseudonym to communicate with Individual A, he did so via the IP address for his residence. Willner sometimes asked Individual A to speak in private and many of their discussions centered on trading before or after markets opened or closed. The SEC said afterhours trading can produce wilder price swings due to the reduced trading volume in many stocks at those times.

The complaint also alleged that Willner and Individual A agreed to split any trading profits equally. The SEC said Willner generated $700,000 in profits. In order to facilitate their agreement, Willner arranged for profits to be sent to Individual A via a digital currency company that converted U.S. dollars to bitcoin.

The case is No. 17-cv-06305.

Attorneys: Joseph G. Sansone for the SEC.

MainStory: TopStory CyberPrivacyFeed Enforcement FraudManipulation NewYorkNews

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