By Barry Ellsworth
TRENTON
A Canadian man has been arrested by FBI agents in the U.S., charged with operating a multi-million dollar stock market fraud involving traders in China and South Korea.
Aleksandr Milrud, 50, of Thornhill, Ontario, allegedly “orchestrated a large-scale, international stock market manipulation scheme,” Paul Fishman, U.S. Attorney for the district of New Jersey, said in a statement.
It marks the “first federal prosecution of securities fraud involving a high-frequency trading strategy known as ‘layering,'” Fishman said.
During a recorded call, Milrud allegedly told an off-shore broker-dealer turned FBI informant that the scheme generated as much as $50 million a month, the FBI said in a statement.
“… Milrud was the engineer behind a sophisticated, international, groundbreaking market manipulation scheme that utilized an illicit, high-speed trading strategy to execute trades,” said special agent Aaron Ford, who was in charge of the investigation. “The loss to investors due to this innovative fraud could be in the millions.”
Layering, or spoofing, as it is also called, involves dozens of traders who, at the same time, give orders to buy or sell a particular stock. That changes the stock price and while the traders withdraw the orders before they can be instituted, one trader initiates real buy or sell orders that take advantage of the higher or lower price.
Fishman said even small price changes brought about by the manipulation could “yield large gains when done on a massive scale.”
Milrud, who also lives in Aventura, Florida, where he was arrested Tuesday at his home, is charged with conspiracy to commit securities fraud and wire fraud. The latter charge could result in a prison sentence of up to 20 years.
In trying to recruit the trader who turned informant, Milrud logged on to the man’s computer, not realizing it was an FBI laptop that recorded all the keystrokes.
He was allegedly recorded saying that all the trades would look “100 percent kosher.”
The U.S. Securities and Exchange Commission also charged Milrud with violations of anti-fraud laws.
