NEW YORK (Fortune) -- Unknown traders hacked into online accounts at seven online brokerage firms, sold off investors' stocks and used the proceeds to pump up the stocks of 15 different Nasdaq-traded companies, the Securities and Exchange Commission announced Wednesday.
It's the latest in a recent wave of market manipulation scandals, with another likely to be announced later Thursday morning.
The "pump and dump" scheme generated at least $732,941 in illicit profits for the unknown traders and cost brokerages some $2 million in losses, according to the SEC, and it marks the third enforcement action filed in as many months involving online account break-ins and market manipulation.
Regulators won an emergency court order to freeze profits held in a Latvian-based bank's trading account that was used to conduct the hi-tech crimes, the SEC said. One or more offshore sub-account holders used the JSC Parex Bank account.
"Using sophisticated computer hacking and identity theft techniques to break into the accounts of innocent online brokerage customers, these perpetrators effectively cut out the middleman of the old fashioned pump-and-dump scheme, eliminating phony stock promotions, creating their own artificial trading demand, and consummating their frauds in as little time as a couple of hours," John Reed Stark, SEC Office of Internet Enforcement chief, said in a statement.
The SEC believes that since December 2005 one or more foreign traders purchased shares in 15 thinly traded companies using the JSC Parex Bank sub-accounts.
They then hacked into online brokerage accounts, sold off existing holdings and used the money to buy shares in the 15 stocks to artificially boost their prices.
Fortune
