The Securities and Exchange Commission recently announced fraud charges against a Ukraine-based trading firm accused of manipulating the U.S. markets hundreds of thousands of times and the New York-based brokerage firm and CEO who allegedly helped make it possible.
The SEC’s complaint alleges that Avalon FA Ltd touted itself to traders as a destination to engage in layering, a scheme in which orders are placed but later canceled after tricking others into buying or selling stocks at artificial prices, resulting in illicit profits. Avalon allegedly made more than $21 million in the layering scheme involving U.S. stocks during a five-year period. According to the SEC’s complaint, Avalon also made more than $7 million in illicit profits through a cross-market manipulation scheme in which the firm bought and sold U.S. stocks at a loss in order to manipulate the prices of the stock and its corresponding options so that it could then profitably trade at artificial prices. Avalon allegedly used traders in Eastern Europe and Asia to conduct its trading, and the firm kept a portion of the profits and collected commissions from the traders.
The SEC’s complaint also describes fraud charges against Avalon’s named owner Nathan Fayyer and Sergey Pustelnik, who allegedly kept his controlling interest in Avalon undisclosed and embedded himself at Lek Securities as a registered representative, using his position to facilitate the schemes.