NEWARK (CN) — In a $26 million case with parallel criminal charges, the SEC on Monday accused two New Jersey-based stock traders of using flurries of “manipulative trading” in dozens of accounts to “walk up” stock prices and dump shares for huge profits.
The SEC sued Joseph Taub, of Clifton, and Elazar Shmalo, of Passaic, in Federal Court, and said in a statement that federal prosecutors have filed parallel criminal charges.
For at least two years beginning in January 2014, the SEC said in its complaint, the men “engaged in a total of at least 23,000 such market manipulation events (hereinafter referred to as ‘Coordinated Trading Events’) and reaped over $26 million in illicit profits. Each Coordinated Trading Event typically occurred in less than 5 minutes, and defendants averaged more than 40 such events per trading day.”
They used “dozens of securities accounts at several brokerage firms to artificially influence the market prices of more than 2,000 exchange-traded securities,” the SEC said in its lawsuit.
In a statement summarizing the 28-page lawsuit, the SEC Taub and Shmalo “would use one account to buy a position in a stock, and then use a second 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 some instances before the first account purchased its position in a stock, they had the second account place a series of smaller sell orders to drive down the price of the stock, allowing the first account to buy its larger position in that stock at the artificially lowered price.”
The SEC seeks disgorgement, penalties and an injunction.
Taub, 37, and Shmalo, 21, were both arrested and released on bond, New Jersey newspapers reported. Both men had to surrender their passports. Shmalo is a dual citizen of the United States and Israel.
If convicted of the criminal charge of conspiracy to commit securities fraud, they could be sentenced to 5 years in federal prison and fined more than twice their ill-gotten gains.
The criminal complaint was filed on Dec. 9 in Newark Federal Court.