April 17, 2012
On April 17, 2012, a criminal Complaint was unsealed in federal court in Newark charging Russian national Petr Murmylyuk, a/k/a "Dmitry Tokar," 31, of Brooklyn, NY, with one count of conspiracy to commit wire fraud, unauthorized access to computers, and securities fraud.
Allegedly, starting in late 2010, Murmylyuk worked with what prosecutors refer to as a ring to gain unauthorized access to the online accounts at firms such as Scottrade, E*Trade, Fidelity, and Schwab. Once the ring had compromised the targeted accounts, the phone numbers and e-mail addresses of record were changed - which effectively intercepted any attempts to notify the victims of any unauthorized trading in their accounts. Having successfully hacked into these accounts, the ring then used the stolen identities to open accounts at other brokerage firms.
After purportedly seizing control of the victims' accounts and then opening new accounts at other firms in the victims' names, the ring then engaged in trading that placed unprofitable and so-called "illogical" trades in the hacked accounts, which resulted in profits in the new accounts. For example, in one alleged series of trades, the victims' accounts sold options to the new account, and the new account then quickly sold back the same contracts to the hacked accounts at inflated prices over the prevailing market - sometimes up to nine times inflated. An alternative strategy - somewhat of a mirror image of the options scheme - would have the new accounts shorting securities at prices significantly over the prevailing market, which the old accounts would buy to the detriment of the victims. To date, losses of oer $1 million have been reported.
The Complaint alleges that Murmylyuk and a conspirator recruited foreign nationals visiting, studying, and living in the United States-including Russian nationals and Houston residents Anton Mezentsev, Galina Korelina, Mikhail Shatov, and others-to open bank accounts into which illegal proceeds could be deposited. Murmylyuk and the conspirator then caused the proceeds of the sham trades to be transferred from the profit accounts into those accounts, where the stolen money could be withdrawn.
Murmylyuk is also accused of placing a telephone call to Trade Station Securities in which he claimed to be "Dmitry Tokar," through whose brokerage account the ring placed approximately $200,000 in fraudulent securities trades.
Mezentsev, Korelina, and Shatov were previously charged in the District of New Jersey and convicted of conspiracy to commit wire fraud based on their agreement to receive stolen money in the accounts in their names. Mezentsev, Korelina, and Shatov were sentenced to 27 months, 14 months, and 14 months in prison, respectively, earlier this year.
Murmylyuk was arrested in Brooklyn on November 3, 2011, in possession of a laptop that evidenced the fraud, and he is currently in state custody facing charges arising out of a separate investigation conducted by the Manhattan District Attorney's Office. If convicted on the federal criminal charges, Murmylyuk faces a maximum potential penalty of five years in prison and a $250,000 fine.
SEC Parallel Case
A parallel civil action is being filed by the U.S. Securities and Exchange Commission (SEC): SEC v. Murmylyuk (DNJ 12-cv-2272-CCC, April 17, 2012). The SEC's case alleges that, on November 1, 2011, Murmylyuk stole money from an unsuspecting victim by illegally intruding into the victim's online brokerage account and fraudulently causing that account to engage in unauthorized options trading in connection with Arena Pharmaceuticals, Inc. ("ARNA") and Biodel, Inc. ("BIOD") with another online brokerage account that Murmylyuk controlled, and which was opened at Trade Station Securities under the fictitious name of "Dmitry Tokar." Allegedly, Murmylyuk caused the victim's account first to purchase thinly traded options from the Tokar account at a high price, and then to immediately sell the same options back to the Tokar account at a much lower price, resulting in a profit of more than $30,000 to Murmylyuk with losses in excess of $140,000 to the victim. The SEC seeks a permanent injunction, an order of disgorgement with interest, and a civil penalty.