More Exante Customers Charged by SEC for Securities Fraud but Broker Cleared

US SEC's prior claims against Exante now dismissed, while new charges against nine of its brokerage customers and settlements are

The United States’ Securities and Exchange Commission (SEC) has announced charges against nine additional defendants in the hacked news release case, in connection with the alleged illegal trading through a brokerage account held with Exante Ltd. – a Malta-based broker which maintained the related accounts on behalf of customers charged in the SEC complaint.

The regulator simultaneously dismissed claims previously filed against Exante, related to the investigation, thus dropping its prior charges against the broker, as mentioned in the SEC update.

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Exante had charges against it from the Maltese regulator (MFSA) dismissed also as previously reported by Finance Magnates – while the parallel investigation from the SEC at the time was escalating with 32 defendants charged last August. This was according to the SEC’s previous announcement related to the $100 million in illegal profits alleged in the case when it was first announced and followed by an asset freeze shortly thereafter.

While EXANTE itself has now been exonerated by both Maltese and US regulators, company insiders are still embroiled in the charges.  Among the groups named as profiting in the insider trading scheme in the initial charges last August was Global Hedge Capital Fund. According to the SEC, EXANTE and Global Hedge share common directors and employees, with EXANTE’s CEO and founder Alexey Kirienko having established Global Hedge in 2007.

Claims Dismissed

The ongoing litigation from the case of the Securities and Exchange Commission (SEC) versus Dubovoy, et al. Civil Action no. 2:15-cv06076 MCA-MAH (DNJ filed August 10th, 2015) was updated by the SEC and dated February 18th in its press release, and brings new charges as well as settlements to some of the named defendants, in addition to the dismissed claims mentioned above.

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The new charges relate to allegations that the defendants participated in a global scheme to execute profitable trades in securities based on nonpublic information that was purposefully stolen by computer hackers from two newswire services and given to the traders to act upon, thus illegally providing actionable data that traders used to anticipate market directions.

Traders Allegedly Profited from Hacker-Stolen Newswire Data

The SEC complaint (case 2:16 cv00845mca-ldw), filed February 17 2016, alleges that the hackers transmitted the stolen data to multiple groups of traders in Russia, the Ukraine, Malta, Cyprus, France, and three U.S. states including Georgia, New York and Pennsylvania, and named nearly a dozen individuals and companies (including the list of defendants in the related actions) that had reaped over $19.5 million in illicit profits from the same stolen data.

The new charges mentioned in litigation update no. 23471 from the SEC is towards an additional nine persons, and cited violations of Sections 10b and 20b of the Securities Exchange Act of 1934 and Rule 10b-5 as well as section 17a of the Securities act of 1933. The complaint seeks a judgment amounting to penalties and restitution by returning ill-gotten gains and with interest, and permanent injunctions against violating future anti-fraud laws, according to the update.

Settlements were also announced in the same update, with three defendants, and how an additional two of the defendants including Igor Dubovoy and Aleksandr Garkusha pled guilty in parallel criminal actions filed by the U.S. Attorney’s Office for the district of New Jersey and Eastern District of New York.

Ron Finberg contributed to this article

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