The U. S. Securities and Exchange Commission (SEC) recently charged two New Jersey-based traders with manipulating more than 2,000 NYSE- and NASDAQ-traded stocks and making over $26 million in ill-gotten profits from their successful trades.
The agency alleged that Joseph Taub and Elazar Shmalo utilized dozens of accounts at various brokerage firms to carry out their scheme undetected, typically using two at a time to engage in a flurry of manipulative trading activity that usually lasted less than five minutes.
According to the complaint, Taub and Elazar 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.
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In some cases 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.
Andrew M. Calamari, Director of the SEC’s New York Regional Office, commented:
As alleged in our complaint, Taub and Shmalo schemed dozens of times per trading day to artificially move stock prices for their personal benefit.
In a parallel action, the U.S. Attorney’s Office announced criminal charges against Taub and Shmalo. The two are charged with violating and aiding and abetting violations of the antifraud provisions of the securities laws. The complaint seeks a permanent injunction as well as the return of ill-gotten gains plus interest and penalties.
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