The article has been automatically translated into English by Google Translate from Russian and has not been edited.
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Russian wolf on Wall Street: how a Russian found out that he faces a multimillion-dollar fine, but was able to escape

The story of Russian Anatoly Knyazev is similar to the famous film "The Wolf of Wall Street". He created a successful brokerage business with partners and, like the hero of Leonardo DiCaprio, became a defendant in a high-profile investigation by the US Securities Commission. How it feels to knowthat you face a multimillion-dollar fine from the morning newspaper and how to overcome pride in order to save the business, he told

Photo: Shutterstock

Horrible dream

In August 2015, our investment company Exante became involved in the investigation of the US Securities and Exchange Commission (SEC). And we learned about it from the press. The SEC is known for successfully accusing such financial giants as Deutsche Bank, JPMorganwho received billions in fines.

Calls rained down, the phone was literally torn - customers, contractors, relatives, friends, and just acquaintances - everyone wanted to understand what had happened, and we ourselves did not understand.

The first thought: "this can not be in reality, this is some kind of mistake, you just have to wake up." But the next day came the official papers. It was a few boxes of documents that the USPS postal service brought us to Malta (our head office is located there).

On the same day, we turned to the two largest US law firms to work with the SEC, and in the end we chose one of them. An hour of a partner of such a company is 1 200 - 1 700 dollars, they worked for six months, and more than one partner worked. We paid them space fees, but never personally met, talked by phone and Skype.

For some time it took us to figure out how it all happened, why our company attracted so much attention. Now everything is clear to everyone: a group of Ukrainian hackers broke into the servers of news agencies and got access to press releases of companies that are traded on the stock exchange before their official publication. Press releases usually contain important information about the company's performance over the reporting period: quarter, half year or year. And knowing it in advance, you can fairly accurately predict the change in the value of shares, buy or sell them, and with a strong movement of the course, make money on it.

Stolen press releases were sold to traders and companies, and Exante called a possible participant in this criminal scheme.

The harsh reality

One of the SEC's arguments was that we and some of the accused used the same IP address - either one computer or one wireless network. And the commission took this as evidence that we are in agreement. We were told that some unknown and our company used the same IP address, so we are connected with it. We checked all our offices, all home addresses of employees, and in the end it turned out that this is the IP address of the business hall of Riga Airport. And we used it with a difference of six months. One of our directors flew through this airport to our Riga office, entered his mail, then six months later another person flew out of there, and also entered his mail. With an interval of six months, they were in the same place on earth. And it was considered a sufficient argument to declare collusion.

We requested official confirmation from Riga Airport that this is their IP address, provided papers to the commission, but this argument was never thrown away, it appears in recent court decisions. Lawyers told us: yes, gayz (guys - approx. Compare), you are treated unfairly, but we can’t do anything, let's just keep trying to break through this wall.

6 months of struggle

And we tried. Over the next five months, we methodically explained to the court and the SEC how we work. It had to be told in great detail, repeating the same thing many, many times. There was no time left for the work itself. Not so I imagined the weekdays of a successful broker.

The investigation itself is still ongoing. It has a criminal part, and there is a civilian. We were members of the civil part. As it turned out later, the prison did not threaten us, but the huge fine that could destroy a business was complete. For example, other participants in this case paid from 2 million to 30 million dollars.

We had a choice with our partners - either to argue and prove the erroneousness of the accusations in court, or to start a dialogue with the commission. In the first variant, we should have been brought before a judge after three years, and it was so much that could take this process, try to explain to him that the commission was wrong, and get a conclusion from the court that we are innocent. But up to this point we had a real risk of losing business. When you are involved in the SEC investigation, nothing happens, formally no one is guilty, but you can’t conduct virtually any business, especially in the financial world, because everywhere it’s stated that you are involved in the SEC investigation. Therefore, we have chosen the second option. Not to argue, not to try to prove one’s case through the court — such a decision was very difficult to accept, emotionally difficult, but from a rational point of view it was correct.

I fell asleep and woke up with thoughts, at what moment everything went wrong, as I found myself in such a situation, why am I not defending myself? Of course, I doubted the correctness of my choice. But when it comes to saving something very dear and important for you, you stop thinking in narrow categories: “you are right or wrong,” “this is a matter of principle,” you have to look at things more broadly.

The best day

Many of the participants in the civil case went to a pre-trial agreement with the commission, but with the payment of a fine and without removing the charges, just to continue working. Mathematically, the payment of a fine is more profitable than waiting for the court.

For us, everything ended well. In January 2016, we reached an agreement with the US Securities and Exchange Commission, which, without penalty and without admission of guilt, they drop charges against us, and the court approved it. All claims from the company were withdrawn and transferred directly to the clients who made these transactions. At the moment we are the only accused from whom all charges were dropped without paying a fine. It was one of the happiest days in my life. And in the life of my partners, of course, too.

From that terrible August 2015 to spring 2016 for us, we have been dealing with solving reputational problems with customers and contractors. It was a very difficult year, we just recently sighed calmly, I personally relaxed only in the last couple of months, for the first time since those events, I allowed myself to go on a little vacation.

My lessons

  1. The most important lesson is the world is imperfect.

Yes, there are claims to the US court, but they will be in other jurisdictions, in Russia, in the UK, anywhere. You just confront the fact that the world is unjust, and no one except yourself will fight for you.

  1. Sometimes you need to make compromises, even if the emotions overrun from the awareness of the injustice and absurdity of the situation.

We could just wait for the trial to prove our case and receive compensation from the SEC for damage and unfounded accusations, but by the time it was received we would have lost the company. Therefore, we focused on working with the investigation and proved that the company was only a technical intermediary in making transactions. At the moment it was much harder from both a financial and operational point of view. We spent a lot of time and money on working with lawyers. But we managed to achieve complete removal of the charges from the company without paying a fine, which allowed us to keep the business. We decided that the existence of a business is more important than a senseless struggle in court. And subsequent events showed that we made the right choice.

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