Rīga-based Parex Bank’s USD 3 million trading account in the United States has been frozen under a federal court order in the District of Columbia, the Securities and Exchange Commission announced March 7.
The decision by U.S. District Court Judge Ricardo M. Urbina involves a case filed March 6 by the SEC against Parex and an unknown number of stock traders who are being accused of a “pump and dump” scheme using the Internet to defraud investors of more than USD 732,000.
The SEC claims in court documents that from at least December 2005 to December 2006, one or more stock traders based abroad purchased shares in 15 companies listed on the Nasdaq exchange. The purchases allegedly were made through sub-accounts of the trading account controlled by Parex.
“These unknown traders then hacked into unsuspecting investors’ online brokerage accounts at seven major online broker-dealers and sold off investors’ existing securities holdings,” the SEC said in a press release. “They then used the proceeds to buy shares on the open market of the thinly-traded issuers the unknown traders had previously purchased in their own sub-accounts.”
The broker-dealers whose customers’ accounts were hacked into suffered about USD 2 million in losses, according to court documents.
Parex’s trading account is held by Pinnacle Capital Markets, a North Carolina-based broker-dealer, the SEC said in court documents. Opened in 2002, the account has 75 sub-accounts. The trading account has 20 beneficiaries living in Latvia, Lithuania, Russia and the British Virgin Islands, the SEC said, but it is unclear who owns the sub-accounts.
The investors whose accounts were hacked into traded through some of the best-known online stock brokers: E*Trade Securities, Scottrade Inc., TD Ameritrade Inc., Vanguard Brokerage Services, Fidelity Investments, Merrill Lynch & Co. Inc. and Charles Schwab & Co. Inc., the SEC said.
No immediate response to the court decision was available from Parex. Founded in 1992, Parex is one of Latvia’s largest banks.
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