March 10, 2017

The SEC announced fraud charges against Ukraine-based trading firm Avalon FA Ltd. for manipulating the U.S. markets hundreds of thousands of times, and against New York-based brokerage firm Lek Securities and its owner Samuel Lek for allegedly assisting in the fraud.  The SEC’s complaint alleges that Avalon touted itself to traders as a destination to engage in layering, a scheme in which orders are placed but later canceled after tricking others into buying or selling stocks at artificial prices, resulting in illicit profits.  Avalon allegedly made more than $21 million in the layering scheme involving U.S. stocks during a five-year period.  According to the SEC’s complaint, Avalon also made more than $7 million in illicit profits through a cross-market manipulation scheme in which the firm bought and sold U.S. stocks at a loss in order to manipulate the prices of the stock and its corresponding options so that it could then profitably trade at artificial prices.  The SEC further alleges that Lek Securities and Samuel Lek made the schemes possible by providing Avalon with access to the U.S. markets, approving the cross-market trading scheme, and improving its trading technology to assist Avalon’s trading.  According to the SEC’s complaint, Lek also relaxed its layering controls after Avalon complained.  The SEC’s complaint also describes fraud charges against Avalon’s named owner Nathan Fayyer and Sergey Pustelnik who allegedly kept his controlling interest in Avalon undisclosed and embedded himself at Lek Securities as a registered representative, using his position to facilitate the scheme. SEC

Tagged in: Market Manipulation and Trading Violations, Securities Fraud,