Traders Bilked Investors With Deceptive Tactics, SEC SaysGreg Farrell
The U.S. Securities and Exchange Commission accused five New Jersey-based traders and their firms of reaping illegal profits from deceptive trading tactics known as “layering” or “spoofing.”
Joseph Dondero, a co-owner of Visionary Trading LLC, tricked investors into buying and selling specific stocks at prices he manipulated by peppering those shares with orders he immediately canceled, the SEC said in an administrative order today. Dondero, his firm and three co-workers will pay about $2.5 million to settle the matter.
Lightspeed Trading LLC, where Visionary held accounts, agreed to pay $478,000 to resolve claims that it failed to supervise Visionary’s representative. Lightspeed’s former chief operating officer agreed to pay $10,000 to settle the matter, the SEC said. The firms and individuals didn’t admit or deny the SEC’s allegations.
“The fair and efficient functioning of the markets requires that prices of securities reflect genuine supply and demand,” Sanjay Wadhwa, senior associate director of the SEC’s New York regional office, said in a statement. “Traders who pervert these natural forces by engaging in layering or some other form of manipulative trading invite close scrutiny from the SEC.”
Dondero’s rapid-fire orders, which occurred from 2008 to 2011, created price fluctuations, increased orders and sent false signals to investors who misinterpreted the “layering” as true demand for the stock, the SEC said.
Dondero agreed to pay $1.9 million and to be barred from the securities industry. Three other individuals paid more than $500,000 to settle the accusations and agreed to two-year suspensions, the SEC said.
John Vazquez, an attorney for Dondero, didn’t return a phone call seeking comment. Lightspeed Trading declined to comment. A phone number listed for Visionary was disconnected.