The SEC drops lawsuits against European broker EXANTE

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The US Securities and Exchange Commission (SEC) has dropped its lawsuit against EXANTE, a European brokerage firm. The lawsuits were in relation to a major financial hacking incident. XNT Ltd. (brand name – EXANTE) is an execution-only broker that provides over 1,000,000 tradable financial instruments from exchanges around the world, including equities, commodities, options, futures, bonds, and currencies.

SEC charges

In 2015, the Securities and Exchange Commission (SEC) in the United States accused nine EXANTE clients of trading illegally through their accounts. US authorities alleged that the defendants had unlawfully accessed more than 100,000 press releases from major PR firms, including Marketwired, PR Newswire New York, and Business Wire San Francisco.

According to US authorities, the press releases contained confidential corporate data that included company business earnings and financial reports. The SEC accused the defendants of using 800 of these releases to execute trades in the financial markets before the information was made public, allowing them to reap unlawful profits of over 100 million USD.

EXANTE had around 400 active clients at the time, consisting of professional traders split between corporates and individuals. As the allegations surfaced, US authorities froze their clients’ funds and assets.

Investigation

During the SEC investigation of EXANTE and following court proceedings, the organisation mischaracterised EXANTE as a ‘hedge fund’. Its allegations portrayed the broker as an investment manager and suggested they had played a part orchestrating the insider trading scheme. American investigators also accused EXANTE of raking in a quarter of the hundred million dollar profits, calling the incident the biggest case of cyber-fraud ever prosecuted.

From the beginning, EXANTE had vehemently denied all allegations. A spokesperson expressed that the SEC’s filings ‘completely misrepresent[ed]EXANTE, [their]business model, and the regulatory conditions [they]operate[d]in’. The broker also got in direct contact with regulatory bodies such as the MFSA in Malta with hopes to dissolve the false allegations.

SEC drops charges against EXANTE

After thorough investigation conducted by both the US authorities and EXANTE, all charges were dropped and all frozen assets unfrozen when the SEC discovered no illicit market activities had been performed. In fact, EXANTE’s legal representative discovered that 99.9% of the assets in EXANTE’s frozen accounts bore no connection to any of the defendants identified in the SEC’s initial complaint, with the majority of the clients never having traded any American securities during the period at all.

However, this high-profile scandal had tarnished EXANTE’s reputation, and the broker’s senior management validly voiced disappointment over the handling of the case and proceeding investigations.

EXANTE stated that US authorities had misrepresented the nature of the broker’s operations. As an execution-only broker, they only provided – and could only provide – their clients with direct access to global markets, and their spokespeople reiterated their concerns about the inaccurate charges. They also emphasised their connection to and compliance with many financial regulatory bodies, such as the MFSA in Malta, hoping to regain traders’ trust after getting mistakenly entangled in the fraud case.

EXANTE rebuilds trust

Since the clearing of the charges, EXANTE has worked hard to ensure business continuity and slowly rebuilt their presence within the trading community. The broker has experienced substantial growth over the years, and it continues to emphasise its strong regulatory compliance with financial authorities while delivering innovative trading solutions. It has won several awards internationally for its state-of-the-art technological developments and diversity initiatives for the underprivileged in finance.

 


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