The SEC charged a Philadelphia-based trader with several Securities Act and Exchange Act violations for allegedly participating in and profiting from a "brokerage account takeover" scheme.
In a Complaint filed in the U.S. District Court for the Eastern District of New York, the SEC alleged that Joseph Willner executed unauthorized trades in coordination with an individual who secretly accessed brokerage accounts of victims and placed securities trades in order to manipulate prices. According to the SEC, Mr. Willner entered into a profit-sharing agreement with the individual, with Mr. Willner paying the individual after taking advantage of artificially inflated prices in order to make profitable trades. The SEC claimed that the individual would use the illegally accessed accounts to place orders at artificial price points, often opposite orders that Mr. Willner had placed through his own brokerage account. Throughout his participation in the scheme, the SEC said, Mr. Willner took measures to conceal his identity by using a pseudonym in communications with the individual.
Mr. Willner allegedly transferred the proceeds by converting U.S. dollars to bitcoins, and transmitting these bitcoins to the individual. The SEC claimed that he was able to generate over $700,000 in illicit profits through his participation in the scheme. As a result, Mr. Willner was charged with violating Securities Act Sections 17(a)(1) and (3), and Exchange Act Sections 9(a)(2) and 10(b) and Rules 10b-5(a) and (c).
Commentary / Joseph V. Moreno
This case, involving unauthorized access to brokerage accounts, embodies two of the SEC's current priorities — protecting retail investors and addressing new and innovative schemes to commit high-tech cyber-fraud. The case also illustrates how bitcoin may be used to hide the proceeds of illicit gains. Expect to see the SEC boosting oversight and regulation in the digital currency space. And expect the new Cyber Unit to be front-and-center in terms of resources and priorities.
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