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Scottrade, Inc. v. BroCo Investments, Inc.

774 F. Supp. 2d 573 (2011)

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Scottrade, Inc. v. BroCo Investments, Inc.

United States District Court for the Southern District of New York
774 F. Supp. 2d 573 (2011)

  • Written by Sharon Feldman, JD

Facts

Scottrade, Inc. (plaintiff) was a broker-dealer registered with the Securities and Exchange Commission (SEC). BroCo Investments, Inc. (BroCo) (defendant) was a Mauritian company that offered investment and brokerage services to foreign customers. BroCo maintained an investment account with Genesis Securities, LLC (Genesis) (defendant), a broker-dealer registered with the SEC. BroCo customer Valery Ksendzov purchased large blocks of thinly traded securities through BroCo’s Genesis account, hacked into Scottrade’s customers’ online accounts, and entered buy orders for the thinly traded securities. The phony purchase orders drove up the price of the securities. Ksendzov sold his securities for huge profits, leaving Scottrade’s customers with worthless illiquid stock. Scottrade reimbursed its customers and sued BroCo, BroCo’s president, and Genesis for securities fraud. Genesis moved to dismiss the complaint, and Scottrade sought leave to amend.

Rule of Law

Issue

Holding and Reasoning (Holwell, J.)

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