S.E.C. charges former Oppenheimer quant in market front-running scheme netting millions

Front-running is trading stock or any other financial asset by a broker who has inside knowledge of future transactions about to affect its price substantially. A broker may also front-run based on insider knowledge that their firm is about to issue a buy or sell recommendation to clients that will almost certainly affect the price of an asset.

The Securities and Exchange Commission has pressed charges against quantitative analyst Sergei Polevikov for a years-long front-running scheme worth at least $8.5 million in illicit profits. Polevikov worked as a quantitative analyst at two prominent asset management firms, including OppenheimerFunds, having access to real-time, non-public information about the size and timing of his employers’ securities orders and trades.

He used that information to secretly trade on, and ahead of, his employers’ trades from at least January 2014 through October 2019, according to the SEC’s complaint.

He denies the allegations

On nearly 3,000 occasions, Polevikov allegedly bought or sold a stock on the same side of the market as his employers before his employers executed trades in the same stock for their fund clients and would close his positions the same day as he opened them, capitalizing on the price movement caused by his employers’ large trades.

The front-running scheme was hidden by executing the trades in the account of his wife, Maryna Arystava, who uses a different last name.

Polevikov is charged with violating the antifraud and reporting provisions of the federal securities laws. The SEC seeks disgorgement of ill-gotten gains plus interest, penalties, and injunctive relief. The complaint also names Arystava as a relief defendant.

The SEC’s Market Abuse Unit’s Analysis and Detection Center, which uses data analysis tools to detect suspicious patterns, such as improbably successful trading across different securities over time, spotted Polevikov’s trading activities which consistently generated small profits that added up to a total of at least $8.5 million over the course of the scheme.

Front running is not easy to detect, especially when engaged by high-speed traders on volumes of stocks. some consider it one of the major market manipulations ongoing today and involving billions of dollars in illegal profits. For anyone interested in insider trading, I recommend Raj Rajaratnam’s book called WHY I FOUGHT THE GOOF FIGHT. He spent over 7 years in prison after conviction of insider trading.

IF YOU HAVE KNOWLEDGE OF FRONT RUNNING, OR ANY OTHER INSIDER TRADING, CALL ATTORNEY JEFFREY A. NEWMAN OF NEWMAN & SHAPIRO WHO REPRESENTS WHISTLEBLOWERS IN LARGER SUM FRONT RUNNING CASES AND OTHER MARKET MANIPULATION WHISTLEBLOWER CASES. HE CAN BE REACHED AT 978-880-4758 or JNewman@NewmanShapiro.com