Lek Securities Motion to Dismiss Denied
On August 25, 2017, the Honorable Denise L. Cote of the U.S. District Court for the Southern District of New York denied a motion by Lek Securities Corporation and its Chief Executive Officer, Samuel Lek, to dismiss the SEC’s claims in an ongoing market manipulation litigation. The SEC’s complaint, filed in March 2017, alleges that Lek Securities and Samuel Lek aided and abetted manipulative trading schemes by one of Lek Securities’ customers, Ukraine-based trading firm Avalon FA Ltd, Avalon’s owner Nathan Fayyer, and its alleged undisclosed control person, Sergey Pustelnik.
The Court denied the Lek defendants’ motion to dismiss in its entirety, rejecting their arguments that the trading schemes at issue in the Complaint were not manipulative. The SEC’s complaint alleges two types of manipulative trading, layering and cross-market manipulation. Layering involves the entry of “non-bona fide” orders (orders that the trader allegedly does not intend to execute and that have no legitimate economic reason) to trick others into trading at artificial prices. The cross-market manipulation involves buying and selling stocks at a loss, allegedly for the purpose of moving the prices of corresponding options, so that Avalon could make a profit by trading those options at artificial prices.The Court found that the two alleged manipulative trading schemes-if proven-would violate Sections 10(b) and 9(a)(2) of the Exchange Act and Section 17(a)(1) of the Securities Act. The Court also concluded that the SEC properly alleged, for the purpose of stating a claim, that Lek Securities and Samuel Lek aided and abetted Avalon’s manipulative trading schemes.
For further information about this securities law blog post, please contact Brenda Hamilton, Securities Attorney at 101 Plaza Real S, Suite 202 N, Boca Raton, Florida, (561) 416-8956, by email at [email protected] or visit www.securitieslawyer101.com. This securities law blog post is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as, and does not constitute, legal and compliance advice on any specific matter, nor does this message create an attorney-client relationship. Please note that the prior results discussed herein do not guarantee similar outcomes.
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