The U.S. Securities and Exchange Commission has accused Emil Botvinnik of taking $3.7 million in a fraudulent scheme involving excessive, high-frequency trading. On November 7, 2018, he asked a New York federal judge to toss the suit because he claimed its allegations do not meet the pleading standard for fraud.
The claims against Botvinnik state that he wrongfully used his clients’ accounts while he was employed at Meyers Associates LP. However, Botvinnik denies these claims and he stated that there are no specific allegations that proves his clients were the type of unsophisticated investors who would not benefit from high-frequency trading. He also stated that his clients may only have been simply unaware of the trading strategy and its risks.
The SEC said that from June 2012 until November 2014, Botvinnik solicited five customers to open securities trading accounts for which he claimed he would employ a profitable trading strategy. He then implemented the strategy of frequent, short-term trades that forced significant costs and commissions on the investors. For example, the accounts would have had to reach an annual return of between 31 and 150 percent just to pay off the transaction costs that built up from the trading strategy. This type of trading is frequently referred to as churning.
Botvinnik also deceptively completed some trades without asking clients’ approvals and providing them with his strategy. His actions have led to approximately $2.7 million in investor losses, while he was left with $3.7 million in allegedly fraudulent gains. The SEC is asking him to return the money and pay a civil penalty.
In his dismissal bid, Botvinnik said the agency’s pleading fails to link any explicit facts to the claims against him, particularly against him exercising control over the accounts and the excessive trading. He stated that for each transaction that is allegedly fraudulent, there should be a claim to prove it. He stated that, instead, the SEC is relying upon high turnover rates and cost-to-equality ratios as evidence that his trading strategy was unsuitable. Botvinnik said that the agency has been unsuccessful in showing that the customers didn’t know of, or intelligently consent to the high-frequency trading strategy.
Botvinnik stated that the claims against him should be dismissed, as they are based on details from telephone and trading records from just one client. His argument is that, just because he did not call a certain client on a specific day, doesn’t mean that he didn’t call the client at a different time to discuss his trading strategy.
This case is SEC v. Botvinnik, case number 1:18-cv-08182, in the District Court for the Southern District of New York.
Silver Law Group is a nationally-recognized securities law firm representing investors worldwide with their claims for losses due to securities and investment fraud. The firm has successfully recovered multi-million dollar awards for its clients through securities arbitration and the courts. Our securities fraud lawyers have represented victims of cold calls, excessive trading and churning hundreds of times. If one of the wolves of Wall Street takes your money, Scott Silver is one of the best securities fraud lawyers to try and get your money back. To contact Scott L. Silver to discuss your legal matter, call toll-free (800) 975-4345 or e-mail him at SSilver@silverlaw.com.