Two New Jersey-based traders were arrested on Monday for allegedly manipulating prices of more than 2,000 New York Stock Exchange- and Nasdaq-listed shares resulting in more than $26m in illegal profits over a two-year period.
MarketWatch reports that regulators, law enforcement, and the exchanges use technology to see, and track, manipulative trading that, in this case happened more than 23,000 times and often lasted just a few minutes.
Joseph Taub, 37, of Clifton, New Jersey, and Elazar Shmalo, 21, of Passaic, New Jersey sometimes controlled at least 80% of the volume of a targeted stock and traded in several accounts simultaneously, the regulators said.
The scheme, says the Securities and Exchange Commission and the U.S. Attorney’s office in New Jersey, was sophisticated. Taub, a registered broker, and Shmalo, who is unemployed, allegedly coordinated trading in more than $10bn worth of securities in dozens of brokerage accounts.
The complaint filed against Taub and Shmalo by the U.S. Attorney says they looked for companies with low trading volumes and then entered numerous trades using “helper” accounts that signaled false information to the market, artificially inflating their prices. Later they sold the shares in “winner” accounts at the artificially inflated prices after accumulating positions at lower prices.
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