Day trader settles spoofing charges brought by SEC

Maria Nikolova

Nicholas Mejia Scrivener of California was accused of perpetrating a manipulative securities trading scheme that netted him $140,000 in profits.

The United States Securities and Exchange Commission (SEC) has announced settled charges against Nicholas Mejia Scrivener of Temecula, California for perpetrating a manipulative securities trading scheme that netted him approximately $140,000 in profits.

According to the SEC’s order, Scrivener, a full-time day trader, engaged in a manipulative trading strategy known as spoofing, which generally involved placing multiple orders to buy or sell a stock that Scrivener did not intend to execute, sometimes at multiple price levels.

Between February 2015 and September 2016, Scrivener engaged in a manipulative securities trading strategy known as spoofing. Scrivener engaged in this strategy in multiple brokerage accounts that he controlled, held both in his own and in his wife’s names, sometimes trading in the same security in multiple accounts at the same time.

Scrivener’s spoofing strategy generally involved placing multiple orders to buy or sell a stock that Scrivener did not intend to execute, or non-bona fide orders, sometimes at multiple price levels. The purpose of these non-bona fide orders was to create a false appearance of buy or sell interest at those price levels and thus to induce other market participants to trade against Scrivener’s bona fide orders on the opposite side of the market at artificially inflated or artificially depressed prices.

For example, after establishing a long position in a stock, Scrivener would place multiple orders to buy that stock, at multiple price levels, often at then-prevailing market prices, without an intent to execute those orders, but rather to create a false appearance of buy interest for the stock at those price levels. Once his non-bona fide buy orders had the desired effect and led to an increase in the market price of the stock, Scrivener entered bona fide sell orders to benefit from the artificially created price increase. After obtaining beneficially priced executions for his bona fide sell orders, and thus closing out his long position at a profit, Scrivener would then cancel his open non-bona fide buy orders.

On other occasions, after establishing a short position in a stock, Scrivener would place non-bona fide sell orders to close out his short position at artificially depressed prices.

At times, Scrivener conducted his manipulative trading in the same stock in multiple accounts at the same time, often placing non-bona fide orders in one account and bona fide orders in another account.

In June 2015, the broker-dealer where Scrivener had held his brokerage account since February 2015 closed Scrivener’s account. But in mid-February 2016, Scrivener opened another account with that broker-dealer in his wife’s name and continued his manipulative trading in that account until March 2016, when the broker-dealer closed that account as well. Scrivener then opened accounts with three other broker-dealers, one in his own name and two in his wife’s name, and continued his manipulative trading in these three accounts until the three broker-dealers closed those accounts one by one between April and September 2016.

By late September 2016, Scrivener generated at least $140,250 in illicit profits from his manipulative trading.

According to the SEC’s order, Scrivener violated Section 9(a)(2) of the Exchange Act, which makes it illegal for any person to effect, alone or with others, a series of transactions in a security creating actual or apparent active trading in such security, or raising or depressing the price of such security, for the purpose of inducing the purchase or sale of such security by others.

Without admitting or denying the SEC’s findings, Scrivener agreed to settle the charges by consenting to a cease-and-desist order and paying disgorgement of $140,250, prejudgment interest of $15,020, and a civil money penalty of $50,000.

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