DIICOT conducting searches in a case reported by BURSA two years ago

Last week, the prosecutors of the DIICOT have announced that they have conducted an operation for dismantling a criminal faction specializing in the manipulation of the stock market. According to several market sources, this concerns the "Carpatica Invest" case, against which the Romanian National Securities Commission, currently merged into the ASF , levied fines of approximately 150,000 lei in 2012.

In October 2012, BURSA wrote about the case of investor Andrei Anghel, who was accusing his broker at Carpatica Invest, Ştefan Terziu, of having committed fraud by making unauthorized trades in the account of the former, using forged documents.

What is strange is the fact that the prosecutors of the DIICOT took this long to conduct the searches and begin the prosecution of five suspects, including Ştefan Terziu. According to the communiqué of the DIICOT of April 30th, the investigators have seized from the suspects' homes documents, IT systems, briefs concerning ownership rights under dispute, which were registered with the ANRP (National Authority for the Retrocession of Properties), but which were instead found at one of the locations that were searched.

Andrei Anghel told us that in 2012, even though he only had shares in the Proprietatea Fund, his broker conducted unauthorized trades in his account. At the time, he told us that he had filed with the police and the CNVM about 180 unsigned orders, which had been processed: "I have submitted several hundred other orders which bore my forged signature. The forgery can be proven through a handwriting test".

Mr. Anghel is saying that the searches conducted by the DIICOT relate to his case: "It is a case similar to the one of Harinvest. They stole from me and they should go to jail. I want my shares back. I suspect that they had connections at the CNVM, since it took so long for the investigation to begin".

On the other hand, the representatives of the Financial Oversight Authority (the former CNVM) are saying that the ASF has collaborated with the criminal investigation bodies for the entire duration of the investigation, after the former CNVM filed a notification with the Department for the Investigation of Frauds of the IGPR (Romanian General Police Inspectorate) in 2012, following an audit at "Carpatica Invest".

Upon the notification of some investors, the CNVM has conducted a for-cause audit at Carpatica Invest between 14.11.2012 - 22.11.2012, following which it levied total fines of 150,949 lei against Carpatica Invest and the people who were found guilty of the irregularities that were uncovered.

Aside from being fined 50,000 lei, Ştefan Terziu also saw his delegate agent authorization withdrawn and he was prohibited from working on the stock market for a period of 5 years.

The CNVM also found that SSIF Carpatica Invest has allowed its delegate agents to do the following: - conclude brokerage contracts with the company's customers, which were only signed by the agents; - the involvement in the operations for managing the customers' funds, by scheduling the payments, without asking the delegate agents for any supporting documents to prove that the clients had issued those instructions, which led to serious violations of the regulations in effect, when it comes to the operations conducted on the accounts of some of the brokerage firms' clients.

It has also been found that the policies and procedures of SSIF Carpatica Invest were inadequate.

At the time, the Commission stated that SSIF "Carpatica Invest" was fully and unconditionally liable for any actions of the agent that acting on its behalf, with the obligation to oversee the activities of the delegate agents to ensue the compliance of the firm with the legal provisions.

The CNVM also found that SSIF "Carpatica Invest" did not pay any particular and immediate attention to all the trades that were complex, unusually large or that didn't fit the usual profile, when it comes to some market operations involving shares in the following companies: BAZV (Bază Ateliere şi Transport Arad), URBI (Urbis Armături Sanitare) and OMEC (Agromec Giurgiu), made between May 18th, 2010 - November 14th, 2012, thus failing to comply with the law.

According to the representatives of the ASF, the CNVM/ASF has notified the DIICOT about the irregularities found at SSIF Carpatica Invest and has constantly cooperated with the criminal investigation bodies from the moment of the initial notification and to the present day when it comes to the market abuse, the manipulation of the stock market and other irregularities uncovered in this case.

The Financial Oversight Authority is said to have conducted another audit at Carpatica Invest this year as well.

• Cosmin Golea: "The two executives of Carpatica Invest who were in charge at the time are no longer working for the company"

At Carpatica Invest, the current management distances itself from the events that happened in 2012.

Cosmin Toma Golea, CEO of Carpatica Invest, told us: "Some of the employees and former employees of Carpatica Invest have been tried by the DIICOT, in a case that was reported to them in 2012, when one of our customers complained about trades that he had not authorized.

We have been informed that the customer in question has also filed a complaint with the National Anti-Corruption Department.

We, the current employees of Carpatica Invest, distance ourselves from the facts in question, we have nothing to do with them.

The two executives of Carpatica Invest who were in charge at the time are no longer working for the company, and the ones that have stayed with the company consider that they have arrived at this situation through a combination of circumstances.

In 2012, Carpatica Invest created a disciplinary commission and has submitted a notification to the CNVM, following the complaint of its customer Andrei Anghel. Broker Ştefan Terziu was also suspended immediately".

In 2012, the executives of Carpatica Invest were Marius Ilie Velţan and Marius Trif. The former is also a suspect in the DIICOT case.

• Ştefan Terziu exculpates himself: "There have been no fraudulent practices"

Just like he did in 2012, broker Ştefan Terziu claims that he is innocent.

"Let the courts decide", the former broker told us, who also told us that it is strange that the investigation is only happening two years later, and he alleges a series of irregularities in the way the searches were conducted.

Ştefan Terziu claims that he filed a criminal complaint himself with the DIICOT and the DNA against "Carpatica Invest" and the ASF, for abuse in office.

"First of all, the stocks which the CNVM claims were manipulated belong to companies on the Rasdaq market, which is unregulated", Ştefan Terziu told us, who added: "As long as there is no law provision that stipulates that the Rasdaq market is regulated, there can be no market manipulation.

When the boom was in full swing, there would be spectacular price rises on the Rasdaq on some stocks, and even now they are still happening".

The former broker also says that he has partially acknowledged his blame, by admitting to the CNVM that he traded using the verbal agreement from the customer: "I've accepted the civil liability for the mistake I've made. In that regard, we can't say it was a fraudulent practice, but rather a violation of the law arising from a necessity.

I was an employee. As long as no technical audit of the IT system was conducted, there can be no talk of an injury.

And as long as no handwriting analysis has been performed, there can be no talk of forgery".

Furthermore, Ştefan Terziu also says that trades were made using his username and password, after he left his job at the brokerage firm, while he was outside Romania, and says that he has provided evidence to back this claim.

He also said: "I was working for a fixed salary. I had no other interest than collecting the fees for the brokerage firm.

I only did what the executives told me. I have conversations I've had with Velţan (Ilie Marius Velţan, executive of the company in 2012, who is also suspected by the DIICOT) and with Gândilă (ed. note: Dan Samoil Gândilă, representative of the Internal Audit Department, suspected by the DIICOT), who were urging me to commit fraud. I've submitted those conversations to the prosecutors' office".

The former broker considers that the stake of the investigation of the DIICOT are the retrocession briefs which he holds.

He said: "In my own name, I own restitution briefs worth tens of millions of Euros. They are trying to take them away from me through proxies. That is what is at stake. I am getting threats, I am being blackmailed by stock market middlemen who are working together with the former management of Carpatica.

On the first search the investigators did not seize the briefs. Later they pressured me, and on the last search they seized them.

There are numerous irregularities. In 2014 new complaints against me were made, after two years. It's all obvious".

According to the DIICOT communiqué, the losses caused in this case amount to 3 million lei.

The prosecutors also said that there is a reasonable suspicion that the suspects have indeed committed the crimes they are being charged with: "The suspects are accused of creating an organized criminal faction which was intended first of all to mislead and defraud the clients of a brokerage firm, as well as manipulate the stock market, through the use trades or trading orders which: - would send false signals or would paint a misleading picture concerning demand, supply or the price of securities; - would keep the price of several securities through the action of one, or, as the case may be, several individuals acting together, at an abnormal or artificial level; they involve the use of fictitious information or any form of forgery".

According to the DIICOT, the criminal faction had been active since back in June 2008, and the judicial authorities had been monitoring the case since 2012.

"Broadly speaking, the plan of the criminals consisted in stealing the victims' money or shares by repeatedly trading them, without prior written orders from their true owners, in order to artificially increase the value of some securities that were unattractive to the market, followed by the appropriation of the shares using the accounts created exclusively for that purpose", the quoted communiqué also says.

The press release of the DIICOT also stipulates that Ştefan Terziu had a significant involvement in the creation of the organized crime faction.

Also, according to the prosecutors, the criminal activity of the members of the group over such a long period of time was made possible through the complicity of executives in the brokerage firm.