SEC wins case against Ukrainian firm involved in manipulative trading schemes


The Securities and Exchange Commission (SEC) obtained a verdict against a Ukrainian firm and two individuals involved in manipulative trading schemes.

On Monday, a jury in New York federal court found Avalon FA Ltd, its owner Nathan Fayyer, and Sergey Pustelnik, who owns a controlling interest in the trading firm, guilty of violating securities laws.

SEC evidence proved the defendants accumulated millions of ill-gotten profits

During the trial, the SEC presented evidence proving that the defendants generated more than $25 million in illegal profits through manipulative trading schemes including layering and cross-market manipulation.

According the securities regulator, layering is a trading practice that involves placing and cancelling orders to trick others into buying or selling stocks at artificial prices.

On the other hand, cross-market manipulation involves buying or selling stocks to artificially affect option prices.

The SEC also presented evidence that Pustelnik concealed his controlling interest in Avalon while inserting himself as a registered representative at Lek Securities to facilitate trading for the Ukrainian firm. Lek Securities is brokerage firm based in New York.

The members of the jury were convinced that the defendants violated the anti-fraud provisions of counts, including that they violated the antifraud provisions of Section 17(a) of the Securities Act of 1933, and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5.

Additionally, the jury found Avalon and Fayyer guilty of violating the market manipulation provision of Section 9(a)(2) of the Exchange Act.

The jury also found the Ukrainian firm, its owner and Pustelnik accountable for violating Section 20(a) of the Exchange Act.

Entities engaged in manipulative trading schemes has “no place” in the market

In a statement, SEC Division of Enforcement Co-Director Stephanie Avakian, said,”This case involved sophisticated, manipulative trading schemes, which generated millions in illicit profits. Today’s verdict demonstrates the SEC’s willingness to take on complex trading schemes in litigation and our ability to achieve strong results.”

On the other hand, SEC Division of Enforcement Co-Director Steven Peikin, commented, “Layering and spoofing undermine the transparency and integrity of the markets. As the jury recognized, such fraudulent conduct violates the securities laws, and has no place in our markets.”