Ray Politeski said he is waiting for a third internal review of his account activity in response to his escalated complaint.Kelsey McMillan/The Globe and Mail
A TD Direct Investing customer says criminals liquidated more than $230,000 of his investments, then drove his account deeply in the red, to buy an obscure Hong Kong stock already involved in a similar case at TD.
Ray Politeski, a retired teacher in Lloydminster, Alta., said scammers gained access to his account in mid-February, sold all of his equity holdings, valued at approximately $234,000, and bought nearly $355,000 worth of shares of Rich Sparkle Holdings Ltd., a little-known Chinese company whose stock price soared and then collapsed early this year.
Mr. Politeski, who also had around $7,800 in cash in the account before the alleged scam, said he was left with a loss of around $93,000.
The trades in Mr. Politeski’s account happened the same day that another Alberta-based TD investor, Tim Tycholis, said he learned that someone had accessed his funds to perpetrate a seemingly identical fraud, only on a larger scale.
As previously reported by The Globe and Mail, Mr. Tycholis, an oil and gas entrepreneur based in Calgary, says fraudsters sold most of his investments to buy more than $5-million worth of Rich Sparkle Holdings, ultimately causing him a loss of around $4.5-million.
Investor alleges $4.5-million in losses owing to fraudulent trades in TD investing accounts
Mr. Tycholis has launched a lawsuit against TD, while Mr. Politeski said he is waiting for a third internal review of his account activity in response to his escalated complaint. In both instances, TD has denied any responsibility, saying the disputed trades were submitted using valid login credentials and that it acted quickly to mitigate the fallout.
The two cases highlight how sophisticated and dangerous scams have become for everyday investors, who can see their portfolios liquidated in minutes, with fraudsters using the proceeds to buy volatile stocks whose value usually collapses shortly thereafter.
TD said it was unable to comment on Mr. Politeski’s situation because it can’t discuss the specifics of an individual client’s account. Similarly, the bank previously told The Globe that it couldn’t comment on Mr. Tycholis’s claims because the matter is before the courts.
In its statement of defence, filed in the Court of King’s Bench of Alberta, TD has denied any liability in that case. Neither Mr. Tycholis’s allegations nor TD’s have been tested in court.
In an e-mail statement, Mina Bines, a spokesperson for TD, said the bank continues to invest in security, monitoring and fraud-detection capabilities to help protect clients and spot potentially suspicious activity.
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Mr. Politeski said the experience has left him feeling helpless.
“It’s a huge hit. I’m more than six months into this, and, I mean, there isn’t a day goes by that you don’t mentally dwell on it,” he said.
“You ask yourself why, you ask yourself how.”
He said the unauthorized trades occurred on the morning of Feb. 13 after he tried to log into his account online and received an unusual but official-looking prompt to provide his confirmation password, which TD would normally require to confirm his trades. Upon entering the password, he was locked out of his account, he said.
Minutes later, someone sold his equity holdings, which were all in blue-chip and large-cap energy stocks, and bought 5,000 shares of Rich Sparkle Holdings, according to documents from TD viewed by The Globe.
Rich Sparkle Holdings, which trades on the Nasdaq stock exchange under the ticker ANPA, says it is a financial printing and corporate-services provider. The company saw its share price soar by more than 550 per cent in early January only to plummet starting on Feb. 10.
Mr. Politeski, who also had around $7,800 in cash in the account before the alleged scam, said he was left with a loss of around $93,000.Kelsey McMillan/The Globe and Mail
The stock was subject to several trading halts during that period because of high volatility, including eight of them on Feb. 13 alone, according to records from the New York Stock Exchange.
Within an hour, TD called Mr. Politeski about the unusual activity and restricted access to the account. Later that day and over the next business day, TD repurchased his original holdings and sold the Rich Sparkle Holdings stock, according to the TD documents. But Mr. Politeski was still left with a loss of nearly $93,000.
He was also left wondering how the scammers’ purchase of the Rich Sparkle Holdings stocks went through even though it exceeded the value of assets in his account by about $113,000.
Mr. Politeski has a cash account at TD, a type of account that doesn’t allow investors to use leverage to buy securities. But while investment dealers can limit cash account holders to buying securities with the cash they have at hand, they may also allow purchases whose value exceeds that of the available funds in the account, as long as clients pay for the trades in full on or before the day they settle.
Mr. Politeski said he was unaware that TD could allow buying transactions larger than his available funds.
He is also asking why TD didn’t reach out to verify whether he was behind the unusual trades before they had settled. It’s a question that he says has become even more urgent after he learned about Mr. Tycholis’s lawsuit.
In that instance, the alleged fraud occurred on Feb. 12, the day before the contested trades in Mr. Politeski’s account. Mr. Tycholis said he didn’t learn about the disputed transactions involving his funds, which he immediately flagged as unauthorized, until the following day.
Harold Geller, an Ottawa-based financial loss litigation lawyer, said dealers often already have the authority to delay trades to verify the legitimacy of an investors’ instructions.
Holding up unusual trades the way credit-card companies routinely do to review purchases that seem out of character poses some headaches for dealers, Mr. Geller said. With prices changing quickly in financial markets, customers can lose money when trades are delayed.
But current regulations say little about when a financial institution should be reasonably expected to pause an unusual trade to protect an investor’s account from fraud, he added.
“That is a failure of regulators to keep up with systemic investor risks,” he said.