SEC Cracks Down on Illegal Stock Racket Worth $26m

Joseph Taub and Elazar Shmalo have been charged with abuse and the manipulation of the stock market.

The US Securities and Exchange Commission (SEC) has cracked down on two New Jersey-based traders today, charging Joseph Taub and Elazar Shmalo with an illegal stock racket responsible for upwards of $26 million in profits, according to an SEC filing.

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Stock scams are hardly new to the United States, with the equities and futures market comprising the main avenues of illicit behavior. The latest charges allege that Mr. Taub and Mr. Shmalo manipulated more than 2,000 NYSE- and NASDAQ-traded stocks, procuring over $26 million.

This was accomplished by utilizing dozens of accounts at multiple brokerage firms to carry out their illegal racket. More specifically, the individuals relied on a blitz of manipulative trading activity that usually lasted less than five minutes, which en masse would cause the movement of stock prices.

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Manipulation Charges

Per the SEC’s complaint, the individuals would rely on the use of one account to buy a given position in a stock, and then utilize an additional account to place a series of small buy orders to walk up the price for the first account to sell its larger position into the market at an artificially high price for significant profits.

In additional cases, before the first account purchased its position in a stock, both that Mr. Taub and Mr. Shmalo also deployed other accounts to place a series of smaller sell orders to erode the price of the stock, thereby enabling the first account to buy its larger position in that stock at the artificially lowered price.

The SEC charges were also accompanied by the US Attorney’s Office for the District of New Jersey, which announced criminal charges against both Mr. Taub and Mr. Shmalo. The SEC complaint seeks a permanent injunction of the two men as well as the return of ill-gotten gains plus interest and penalties.

According to Andrew M. Calamari, Director of the SEC’s New York Regional Office, in a recent statement on the allegations: “As alleged in our complaint, Taub and Shmalo schemed dozens of times per trading day to artificially move stock prices for their personal benefit.”

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