SEC expects to reach agreement with quant analyst behind $8.5M front-running scheme

The United States Securities and Exchange Commission (SEC) and Sergei Polevikov, a quant analyst behind an $8.5 million front-running scheme are close to reaching an agreement. This becomes clear from documents filed in the New York Southern District Court on January 10, 2022.

The documents, seen by FX News Group, show that the parties are engaged in discussions and expect to reach an agreement resolving this matter within the next few weeks. They request an adjournment of case deadlines to allow them to continue those discussions.

In response to the request, Judge Valerie E. Caproni has agreed to reschedule the Initial Pre-Trial Conference for February 18, 2022.

According to the SEC’s complaint, Polevikov worked as a quantitative analyst at two prominent asset management firms. From at least January 2014 through October 2019, Polevikov had access to real-time, non-public information about the size and timing of his employers’ securities orders and trades, and used that information to secretly trade on, and ahead of, his employers’ trades.

As alleged, Polevikov, on nearly 3,000 occasions, 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. Polevikov typically would close his positions the same day as he opened them, capitalizing on the price movement caused by his employers’ large trades.

The SEC alleges that Polevikov concealed his fraudulent scheme by executing the trades in the account of his wife, Maryna Arystava, who uses a different last name.

The investigation originated from 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. These capabilities enabled the SEC to spot 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.

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