Audrey Strauss, the United States Attorney for the Southern District of New York, and Michael J. Driscoll, the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced the unsealing of a Complaint charging SERGEI POLEVIKOV with securities fraud, wire fraud, and investment company fraud in connection with his fraudulent scheme to misappropriate confidential information about pending trades by his employer, an investment adviser, on behalf of its investment company clients. POLEVIKOV was arrested last night and will be presented this afternoon before Magistrate Judge James L. Cott.
Manhattan U.S. Attorney Audrey Strauss said: “As alleged, Sergei Polevikov violated not just the terms of his employment but also the law when he exploited material, nonpublic information to make personal trades ahead of large institutional trades, reaping more than $8 million in illicit profits. Despite his alleged efforts to conceal it, Polevikov’s scheme was uncovered, and he is facing serious federal charges.”
FBI Assistant Director Michael J. Driscoll said: “Using material, nonpublic information to exploit small price movements in his employer’s stock, Polevikov, as we allege, realized significant financial gains for himself through his trades. While these schemes are unfortunately all too common, so is the response of the FBI – if you misappropriate proprietary information for your own personal gain, you should expect to hear from us.”
According to the allegations contained in the Complaint:
From at least in or about 2014 through in or about October 2019, SERGEI POLEVIKOV was employed as a quantitative analyst at an asset management firm with headquarters in New York, New York (the “Employer Firm”). In his role at the Employer Firm, POLEVIKOV had regular access to information regarding contemplated securities trades on behalf of the Employer Firm’s clients, which included investment companies. During the period charged in the Complaint, POLEVIKOV engaged in a front-running scheme to misappropriate confidential, material, nonpublic information about the securities trade orders of the Employer Firm on behalf of its clients in order to engage in short-term personal securities trading in a brokerage account opened in his wife’s name. POLEVIKOV’s scheme was designed to profit by executing trades that take advantage of relatively small price movements in a company’s stock that follow from large securities orders executed by the Employer Firm on behalf of its clients. In total, POLEVIKOV’s scheme yielded more than $8.5 million in illicit profits.
To conceal his front-running scheme, and notwithstanding policies of the Employer Firm to prevent insider trading, POLEVIKOV lied to the Employer Firm about his personal trading accounts and securities trades conducted therein in violation of the Investment Company Act.
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POLEVIKOV, 48, of Port Washington, New York, is charged with one count of securities fraud, one count of wire fraud, and one count of investment company fraud. POLEVIKOV faces a maximum sentence of 20 years in prison on the securities fraud and wire fraud charges, and five years in prison on the investment company fraud charge.
The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Ms. Strauss praised the investigative work of FBI. Ms. Strauss also thanked the Securities & Exchange Commission, which brought a related civil action against POLEVIKOV that was filed today.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorney Kiersten A. Fletcher is in charge of the prosecution.
The charges contained in the Complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
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