Pakistani man accused of making $425,000 by manipulating US stock

A federal court in Manhattan issued an order on Tuesday to freeze the assets of a Pakistani man after the US Securities and Exchange Commission filed a complaint that he had allegedly manipulated a technology stock and had made $425,000 in profits.

Nauman A Aly is accused of violating anti-fraud provisions of the US federal securities laws after a false regulatory filing was traced to his computer in Pakistan, according to the SEC website.

“We allege that Aly tried to fool the markets from a computer in Pakistan to make an easy profit, but we made sure he didn’t cash in.  Market manipulation doesn’t pay, no matter the method or how distant the perpetrator,” said Andrew Ceresney, Director of the SEC Enforcement Division.

The court order ensures that Aly cannot withdraw from his US-based account the $425,000 in options trading profits made in less than 30 minutes last month after the false filing.  The filing stated that Aly and six Chinese investors had collectively acquired 5.1 per cent of Silicon Valley-based Integrated Device Technology (IDT). According to the SEC’s complaint, his false statements caused the company’s stock to spike more than 25 per cent within minutes.

According to the SEC’s complaint, this is how Aly carried out the fraud:

On April 12 at 11:50 am Eastern Time, Aly purchased 1,850 call options in IDT in his US brokerage account for $18,500.

At 12:08 pm, Aly filed a form known as a Schedule 13D on the SEC’s EDGAR system and falsely stated that his group of investors had a 5.1 per cent beneficial ownership of IDT and had sent a letter to the board of directors offering to acquire all of the company’s shares for a price that represented a 65 per cent premium.

The market reacted quickly to the filing, and IDT’s stock price increased by more than 25 per cent in less than 10 minutes.

At 12:18 pm, Aly sold all of the options for the illicit $425,000 profit.  He then filed another Schedule 13D stating that his group of investors no longer owned more than 5 per cent of IDT after his options sales.

Aly used the same IP address for the options trades that he used to make the false filings. Aly’s group of investors never actually owned 5.1 per cent of IDT and never contacted IDT to buy all of its shares.

The US SEC is currently investigating the case further.