The Securities and Exchange Commission has charged a Latvian trader with using a practice coined "naked access"  to hack into online brokerge accounts amd earn more than $850,000 in profits by manipulating the price of 100 stocks.
 
The charges recently filed in a federal court in San Francisco allege that Ivan Nagaicev, a Latvian citizen conducted 159 unauthorized trades in 2009 and 2010 by hijacking a number of online brokerage accounts and drove stock prices up or down by making purchases or sales. He did this about 150 times over 14 months. Then using the direct market access provided to him by four unregisstered trading firms he traded  those same securities at artificial prices. The four trading firms are Alchemy Ventures, KM Capital Management, Zansken Enterprises and Mercury Capital are also accused by the SEC of providing Nagaciev with the ability to circumvent securities laws by allowing hi to trade shares in their name without any pre-trade checks. Mercury Capital and two of the eight executives involved have already settled with the SEC.
 
Nagaicev's activities took place before the implementation of rules by the SEC last year to ban the practice of naked access, which allows customers to access markets directly without any screening of their trades. Had the rules been in effect, Nagaicev's trades might have been caught by the clearing firms of the trading firms, say operations executives. The case is considered the largest ever that the SEC has brought to court involving account intrusion and demonstrate's the agency's crackdown on such trading, Naked access is considered at the heart of the May 2010 flash crash in which a broker's order placed directly in the market through an algorithm ultimately caused a 6 percent swing in the S&P 500 index in a minute.
 
The SEC wants the court to impose financial penalties on Nagaicev and return trading profits. "Nagaicev engaged in brazen systemic securities fraud repeatedly raiding brokerage accounts and causing massive damages to innocent investors and the brokerage accounts," says the SEC.  Those damages amounted to $2 million.
 
Written by Chris Kentouris, Editor-in-chief (Chris can be contacted through Chris.Kentouris@hotmail.com).

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