(HedgeCo.Net) The Securities and Exchange Commission has announced charges against Denis Georgiyevich Sotnikov and entities he controlled for allegedly participating in a fraudulent scheme to lure U.S. investors into buying fictitious Certificates of Deposit (CDs) promoted through internet advertising and “spoofed” websites that mimic the actual sites of legitimate financial institutions.
According to the SEC’s complaint, the scheme involved purchasing internet ads that targeted investors who were searching for CDs with high rates. 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. When investors called the phone number on the websites, an “account executive” impersonating a real registered representative directed investors to wire funds to so-called “clearing” partners. 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.
“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.”
“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.”
The SEC’s Office of Investor Education and Advocacy previously issued an investor alert cautioning investors to be aware of spoofed websites offering phony CDs.
In a parallel action, the U.S. Attorney’s Office for the District of New Jersey today announced related criminal charges and are pursuing asset seizures.
The SEC’s complaint, filed in federal court in the District of New Jersey, charges Sotnikov, Adaptive Technology LLC, AGQ Business Group LLC, ATL Business Group LLC, BO&SA Corp., DN Industrial LLC, and Expert Digital LLC with violating the antifraud provisions of the federal securities laws and Sotnikov with aiding and abetting those violations. The SEC seeks permanent injunctive relief and the return of allegedly ill-gotten gains with prejudgment interest and penalties. The complaint also names Sotnikov’s wife Natalia Mazitova as well as Great Imperial LLC, HRC Clearing House LLC, and Inteko Cargo LLC as relief defendants.