U.S. District Court Judge Denise Cote entered final judgments against brokerage firm Lek Securities Corp. and its CEO, Sam Lek, who were charged by the U.S. Securities and Exchange Commission with facilitating manipulative U.S. trading by a Ukrainian firm over a three-year period.
The regulator's 2017 complaint had claimed that Lek Securities and its chief executive helped facilitate manipulative trading schemes by its customer, Kiev, Ukraine-based Avalon FA Ltd. Avalon allegedly profited illegally from layering, which involved placing and canceling orders to trick others into buying or selling stocks at artificial prices, and cross-market manipulation, which involved buying or selling stocks to artificially impact options prices.
The defendants allegedly gave Avalon access to the U.S. markets, relaxing the brokerage firm's layering controls after Avalon complained, allowing Avalon to conduct the trading activity, and improving Lek Securities' technology to assist Avalon's trading.
Lek Securities will pay a $1 million penalty plus $525,892 in disgorgement and prejudgment interest, and Sam Lek will pay a $420,000 penalty. In settling the SEC's charges, Lek Securities and Sam Lek admit that Avalon's trading activity through Lek Securities constituted violations of the federal securities laws.
The brokerage firm also agreed to a three-year injunction requiring it to terminate business with foreign customers potentially engaged in market manipulation or manipulative trading and largely prohibiting it from providing intra-day trading to foreign customers. Lek Securities also agreed to retain an independent compliance monitor for a three-year period and, along with Sam Lek, agreed to permanent injunctions from violations of the charged anti-fraud and manipulative trading provisions.
