SEC accuses Russian national of securities fraud worth $31 million

Key points:

• The SEC has charged a Russian citizen with organizing a scheme to hack accounts and steal $31 million.
• The suspect acted together with accomplices.
• He has been charged with violating the Securities Act of 1933 and the Stock Exchange Act of 1933.

The US Securities and Exchange Commission (SEC) has charged Russian citizen Dmitrii Kushnarev with organizing a $31 million securities fraud scheme that lasted more than seven years. According to the regulator, Kushnarev hacked into hundreds of brokerage accounts in the United States, manipulating stock and option prices to make illegal profits.

Court documents show that he previously served a prison sentence in Russia from 2002 to 2004 for fraud-related crimes.

Manipulation scheme

Authorities allege that between 2014 and 2021, Kushnarev used 20 fake accounts to open fictitious accounts and make profitable trades in hundreds of securities listed on the New York Stock Exchange (NYSE), Nasdaq, or over-the-counter markets, which were simultaneously manipulated by other hacked accounts.

It is reported that the scheme was implemented in three stages:

• Account theft. Kushnarev and his accomplices allegedly gained unauthorized access to the accounts of US brokerage firms by hacking or stealing login credentials.
• Price manipulation. They then executed trades designed to manipulate the prices of certain stocks and options.
• Profit extraction. Using his own accounts registered under fake names, Kushnarev executed corresponding trades to profit from market movements.

Charges

In total, according to the SEC, Kushnarev stole $31 million in gross proceeds from his trades and made $1,5 million in profits. He is charged with violating the Securities Act of 1933 and the Stock Exchange Act of 1933. He is also charged with violating Section 9(a)(2) of the Exchange Act, which makes it illegal for any person to knowingly engage in a series of transactions in any security, directly or indirectly, that creates an actual or apparent active market in that security, with the intent to induce others to trade in that security.

The SEC’s investigation is ongoing. The case is being handled by Cyber and Emerging Technologies Unit Chief Laura D’Allaird, Market Abuse Unit Chief Joseph Sansone, and Justin Jeffries of the Atlanta Regional Office. Robert Gordon of the Atlanta Regional Office will lead the SEC’s litigation efforts, under the direction of M. Graham Loomis.