SEC v. Chan, et al.

Violations Charged

Section 10(b), Rule 10b-5, Section 9(a)

Case Overview

Medico International (MDDT) had no cash, no employees, no website, and over $490,000 in liabilities, yet in early 2019 it traded at a market value of $6 million to $12 million. The SEC charged five defendants in Malaysia, Singapore, and China with creating the appearance of active trading in the stock: over 180 matched trades covering roughly 340,000 shares, 45% of the stock's entire trading volume between February 27 and April 15, 2019, with orders placed seconds apart at identical prices and sizes.

On extended stretches the defendants' trading with each other exceeded 90% of total market volume, and on two days it was 100%. According to the complaint, three of the five received over $370,000 in profits, and wire transfers toward Hong Kong preceded the SEC's ex parte asset freeze.

What Joe Did

Joe was the principal investigator, and his 16-page, 29-exhibit declaration supported the SEC's emergency application. In it, he described using Bluesheet and FINRA audit trail data to identify the opposite-side counterparties at five brokerages, the matched orders entered seconds apart at identical prices, the shared IP addresses and VPN use across the accounts, and the outbound wire transfers to Hong Kong that located assets for the freeze.

Outcome

The court granted the asset freeze and TRO the same day. The foreign defendants largely declined to defend the case, and it resolved through consents and defaults.

Records Analyzed

• Bluesheets & FINRA audit trail
• Electronic trading data
• IP address & VPN records
• Transfer agent records
• Wire records
• Account opening documents