Steven Petrov
The Paw Print
Five years ago the US Congress authorized the prosecution to press criminal charges against those stock brokers that make fortunes by using illegal schemes and manipulations. Few years have gone by since then, but the first major defendants from the Finance industry have been appointed.
Navinder Singh Sarao was recently arrested in the UK, under the accusation of illegal manipulations of the stock markets, which led to the “flash crash” of 2010 when the Dow Jones Industrial Average index fell more than 600 points in a matter of hours. Michael Coscia was another “big-time” investor who was arrested in the US under the same charges.
One of the world’s most respected economists, Jacob Frenkel, who is currently serving as the Chairman of JPMorgan Chase International, stated that even though he “Doesn’t have a crystal ball through which he could see the future” he is almost completely positive that there will be many more similar arrests in the near future. The expert says that the legislation passed by the Congress, which strictly forbids certain activities in the markets, such as insider buying/selling, hidden practices, and betting against your clients’ trades etc., is what enables the prosecution to be able to build solid cases against these financial criminals. The relatively slow process in building up the cases by the prosecution throughout the last few years, has been associated with the extremely complex accusations and the need for many additional research and analysis of current and potential new leads, testimonies, as well any other information associated with the defendants.
That is the brokers’ scheme? So, the broker declares that he wants to sell a large quantity of shares of a particular company, and when the other brokers see that many shares are about to be sold they start selling as well, thus anticipating the drop in the stock’s price. However, the financial criminal then cancels his large sell order and starts buying that same stock at a much lower price, driving out of the market all of those who initially sold. In some cases the profits are small, but when the process is performed hundreds of times with large quantities the amounts could quickly become astonishing. Up until recently, the crooks were used to explain their last minute decision to cancel their initially placed order by a “change in the market conditions,” “sixth sense,” “instinct,” and various similarly bogus explanations that could enable them to get out of the case free of charge. However, with the new financial regulations the prosecution has been able to develop a thorough process in creating each of the suspects’ trading profiles in a way that can prove the presence of an illegal activity.
There have been few successful civil lawsuits against brokers in the recent years. Igor Oystacher known as “the Russian” was fined $150,000 for trying to manipulate the commodities market. Michael Coscia had to pay $3 million for fraudulent activities in the gold and soybeans markets that have made him a profit of $1.6 million.
What’s Been Said…