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Net closing on US market manipulators as Scot charged

Last updated: 12:02 06 Nov 2015 EST, First published: 10:02 06 Nov 2015 EST

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Looks like the party's over - for market manipulators that is....

The net appears to be closing on stock market manipulators in the US, who twist stocks to their own ends - as a series of high profile legal cases have underlined.

The latest is the rather fantastical case of a 62-year-old man from Scotland who faces a £1mln stock fraud case after he allegedly posted fake tweets on Twitter.

James Craig has been charged by a federal grand jury in San Francisco on fraud.

Prosecutors claim Mr Craig sent false tweets, resulting in the shares of two companies -  Audience and  Sarepta - plunging.

He then bought shares and profited when the prices rebounded, it is alleged.

And there was a stark warning today from acting US attorney Brian Stretch for any others who may be mulling such practices.

"This prosecution makes clear that we will find and prosecute those who commit fraud on our stock exchanges, by any means, no matter where they reside."

It comes after yesterday a New York securities lawyer and two investment advisers were charged as part of a probe into an alleged US$300mln penny stock manipulation.

And on Thursday, trader Michael Coscia became the first person to be convicted after a trial of what's known as "spoofing", involving market bets, after new regulations were brought in in 2010.

These latest underhand techniques to manipulate markets are causing a stir with US authorities, which are trying to clamp down.

Reportedly, there are many 'spoofing' investigations being carried out currently.

UK trader Navinder Singh Sarao, dubbed the 'Hound of Hounslow’, has denied charges relating to manipulation brought by US authorities in April, which they allege contributed to the May 2010 ‘flash crash’.

Spoofing gets the perpetrator only small profits, but often. The trader makes a large bet on or against a firm's shares, and the market reacts accordingly with the security rising or falling.

He or she then cancels the bet once the market reacts and then goes back to bet on or against the security for real.

Coscia, the owner of Panther Energy Trading, it was claimed, entered large orders into futures markets in 2011 that he never intended to execute, creating an illusion of demand so that he could make money on smaller trades.

Coscia’s prosecution after the seven day trial was the first under an anti-spoofing provision under the 2010 Dodd-Frank financial reform.

On Wednesday three businessmen were arrested in the US -  Darren Ofsink, founder of Ofsink LLC, broker Darren Goodrich and managing director of Halcyon Cabot Partners Michael Morris.

They stand accused of manipulating shares in penny stocks health-care coding firm CodeSmart Holdings, mobile technology developer Cubed, and other small companies. All three of pleaded not guilty.

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