The Securities and Exchange Commission charged a Russian national Friday with overseeing a $26 million scam to lure U.S. investors into buying fictitious Certificates of Deposit.
The SEC’s complaint, filed in federal court in the District of New Jersey, charges Denis Georgiyevich Sotnikov, 36, of Hallandale Beach, Fla., and several entities he controls with violating the antifraud provisions of the federal securities laws.
In a parallel action, the U.S. Attorney’s Office for the District of New Jersey announced related criminal charges and are pursuing asset seizures. The alleged scam began in November 2014 and continued until this month, the SEC said.
“As alleged in our complaint, investors were swindled out of millions of dollars through a web of fake websites and concealed identities,” said SEC Enforcement Division Co-Director Steven Peikin. “Today’s action shows the SEC’s commitment to exposing sophisticated cyber fraud schemes that pose an ever-present risk to Main Street investors.”
The scheme involved purchasing internet ads that targeted investors who were searching for CDs with high rates, the SEC complaint said. The ads allegedly included links to phony websites, which falsely claimed that the firms offering the CDs were members of FINRA and the FDIC, and that deposits were FDIC-insured.
“Investors are instructed by the fake account executives to wire funds to bank accounts opened on behalf of purported ‘clearing firms’ identified in the emails,” the SEC complaint said. “Once the funds are received by the purported ‘clearing firm,’ they are quickly transferred to different bank accounts, both domestic and foreign, making it difficult or impossible for investors to regain their funds.”
These alleged clearing partners were entities used by Sotnikov to launder and misappropriate investor funds.
Since November 2014, the alleged scheme involved spoofing the websites of at least 24 actual financial firms or using at least 8 fictitious entities, resulting in over $26 million in known investor losses – with many of those losses from older investors who used their retirement savings.
“Investors should be wary of investment opportunities from websites found only through internet searches,” added SEC Enforcement Division Co-Director Stephanie Avakian. “Online investments that sound too good to be true are red flags of fraud.”
In addition to Sotnikov, Adaptive Technology LLC, AGQ Business Group LLC, ATL Business Group LLC, BO&SA Corp., DN Industrial LLC, and Expert Digital LLC are charged with federal securities violations, according to the complaint.
InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at email@example.com. Follow him on Twitter @INNJohnH.
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