SEC Actions Uncover Off-Hours Spoofing Scheme and Crypto Fund Fraud
US securities regulators have concluded two separate enforcement actions exposing market manipulation tactics spanning both traditional equities and cryptocurrency investments. In California, a trader faces more than $500,000 in penalties for allegedly manipulating stock prices during off-hours trading, while an Alabama promoter was sanctioned for misrepresenting a crypto-focused private fund that never actually operated as described to investors.
Background and Context
The cases highlight ongoing challenges for regulators policing markets that operate 24 hours a day. Spoofing—the practice of placing orders with no intention of executing them to manipulate prices—remains a persistent concern despite increased surveillance by the Securities and Exchange Commission. Meanwhile, cryptocurrency offerings continue to present verification difficulties for regulators due to their cross-border nature and technical complexity.
Both enforcement actions underscore how financial misconduct increasingly spans traditional and digital asset markets, with perpetrators exploiting regulatory gaps between different financial instruments.
Key Figures and Entities
The SEC filed settled charges against Artur Khachatryan, 41, a California resident who allegedly generated nearly $374,000 in profits through a two-year spoofing scheme. According to court documents, Khachatryan operated through multiple brokerage accounts—including ones opened in the names of relatives after brokers restricted or closed his accounts for suspicious activities.
In a separate case, James O. Ward Jr. of Alabama faced an $85,000 civil penalty after the SEC determined he misrepresented the Apex Financial Institute, a British Virgin Islands-registered crypto fund he co-founded. Ward raised at least $852,000 from approximately 70 investors between March and September 2021 by making false claims about the fund's regulatory status, assets under management, and operational history.
Legal and Financial Mechanisms
The SEC complaint alleges Khachatryan manipulated prices in thinly traded stocks by flooding the market with visible limit orders outside regular trading hours. By narrowing bid-ask spreads and pushing prices in advantageous directions, he could place real orders on the opposite side of the market before quickly canceling the spoof orders. This pattern allowed him to profit from both upward and downward price movements, according to investigators.
Ward's alleged misrepresentations included claims that Apex was SEC-regulated, managed $25 million in assets, and maintained offices in Dubai, Cyprus, and Sweden. The SEC found that the fund had no assets before investor contributions, did not exist in 2020, operated from the homes of its principals, and never created the promised "Apex Financial Token" pegged to the US dollar.
International Implications and Policy Response
These cases demonstrate how market manipulation adapts to regulatory environments, with perpetrators moving activities to less monitored hours or jurisdictions with oversight challenges. The spoofing scheme operated during pre-market and after-hours sessions when surveillance is typically reduced, while the crypto fund fraud exploited the regulatory ambiguity surrounding digital assets registered offshore.
Enforcement actions like these reflect the SEC's increasing focus on cross-border financial misconduct and market manipulation schemes that span multiple regulatory domains. Both cases resulted in significant penalties without admission of wrongdoing, a common resolution strategy that allows regulators to secure remedies while avoiding lengthy litigation.
Sources
This report draws on SEC enforcement announcements, court documents from the Central District of California and Southern District of Alabama, and public statements regarding the settled charges against Artur Khachatryan and James O. Ward Jr. Information about spoofing tactics and regulatory oversight comes from SEC guidance documents and related financial regulatory materials.
