Malta-based Exante is trying to extricate its clients from an asset freeze imposed by the American Securities and Exchange Commission (SEC) after it was implicated a month ago in a $100 million insider trading scandal.

In all, American investigators believe Exante could have made in excess of $24 million through the scam over the past five years – but the company is arguing that this was based on an incorrect understanding of its business model.

“The SEC has assumed that we are a ‘hedge fund’ and that we were making these trades for our own benefit. The reality – which is very easy to prove from our MFSA licence and our audited financial reports – is that we are an executing broker,” Exante executive director Gatis Eglitis explained, holding up a detailed report drawn up by its lawyer Eric Benksy on the current situation.

Exante has around 400 active clients, split equally between corporates and individuals.

“What we do is provide direct market access to our clients via a platform that aggregates dozens of stock, futures and options exchanges all over the world and all their financial instruments – which is very cost-effective for our clients, all of whom are professionals. We could easily have explained this to the SEC had they contacted us before they took action.”

Part of the SEC’s case is based on the fact that an IP address that turned up during their investigations was used by one of the Exante partners – but Mr Eglitis said that this address was the public Wi-Fi at Riga airport and it meant nothing more than using internet at the same airport within a few months of other defendants.

Exante is not brushing off the allegations: it is claiming its own innocence

Exante is not brushing off the allegations: it is claiming its own innocence, pointing out that it does not make trades itself or advise clients, but it has freely admitted that some of its customers may have been implicated in the case similarly to clients of other brokerage companies listed in the case. What Exante wants is to help the SEC focus on the right suspects and release the assets of its innocent customers.

Ensuring business continuity

The US District Court in Newark has indicated that it would be willing to release the assets in the frozen accounts within a few weeks “following the receipt of additional consistent information establishing that the assets’ owners are unrelated to the alleged illicit trading scheme”.

So far, Exante’s legal representative found that only a few Exante customers were involved in the alleged illicit trades, and that 99.9 per cent of the assets in Exante’s frozen accounts bear no connection to any of the defendants identified in the complaint. It also noted that 92 of the 102 customers whose assets were frozen never traded in any American securities during the period being investigated.

“We appreciate the SEC’s mission to protect honest investors from fraud and we fight for exactly the same thing, because our core values stand for transparency and market accessibility,” Mr Eglitis said.

So far there is no evidence in the complaint or the SEC’s declarations that Exante or its customers received any inside information and there is no evidence that Exante ever traded US securities on its own account.

We have checked all the information available and have sent thousands of documents to the SEC and MFSA. We are also collaborating with the local police who are investigating the claims

“Upon receipt of any evidence, we will review it rigorously and responsibly,” Mr Eglitis said. “We have checked all the information available and have sent thousands of documents to the SEC and MFSA. We are also collaborating with the local police who are investigating the claims.

“Since we opened in 2011 we have worked very hard to build up a presence for ourselves in the Maltese community and this has helped. Many of our clients and partners have remained loyal to us and we have even signed up new accounts. We are grateful to our employees that are working hard to ensure business continuity. But I cannot pretend that we have not been hit hard. Clearing our name is a matter of life and death for us,” he said.

“July 2015 was a record sales month in Exante, the result of years of hard work and we appreciate the cost of a lost reputation.

“The gains you can make out of doing something wrong can never make up for what you gain by building up a long-term portfolio based on people’s trust,” he said, looking wistfully out across the bay from his Portomaso Tower office.

As reported earlier in August, the SEC filed legal proceedings against 32 defendants, including Exante Ltd, after it found that between 2010 and 2015, hackers accessed the files of public relations companies and made a killing by trading based on price sensitive information that was not yet publicly available – in one dramatic case making €500,000 by acting on information just 36 minutes before company news was released.

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