The U.S. Securities and Exchange Commission today announced the filing of civil charges against three Indian nationals who it alleges participated in a fraudulent scheme to manipulate the prices of at least 14 securities through the unauthorized use of other people’s online brokerage accounts.

In a related action, the U.S. Department of Justice announced that a federal court in Nebraska today unsealed a 23 count indictment against the individuals charged in the commission’s complaint.

According to the commission’s complaint, between July and November 2006, the defendants repeatedly hijacked the online brokerage accounts of unwitting investors using stolen usernames and passwords. Prior to intruding into these accounts, the defendants acquired positions in the securities of at least 14 securities, including Sun Microsystems, Inc., and “out of the money” put options on shares of Google, Inc. Then, without the accountholders’ knowledge, and using the victims’ own accounts and funds, the defendants placed scores of unauthorized buy orders at above-market prices. After these unauthorized buy orders were placed, they sold the positions held in their own accounts at the artificially inflated prices, realizing profits of over US$121,500.

These allegations have not been proven.

“Hackers who prey on American investors — no matter what continent they’re operating from — are meeting their match with powerful adversaries in the Department of Justice and the Securities and Exchange Commission. We will go anywhere on earth to stop these thieves and hold them accountable,” said SEC Chairman Christopher Cox.

“It is particularly troubling that, aside from profiting from their scheme, the defendants caused over US$875,000 in damage to the brokerage firms whose customers’ accounts were compromised,” said Linda Thomsen, director of the SEC’s Division of Enforcement.

The SEC has brought four account intrusion cases since December, involving defendants in Estonia, Latvia and now, Hong Kong and Malaysia.

“The commission is cracking down on these intrusions,” said Cheryl Scarboro, associate director of the SEC’s Division of Enforcement. “This is the fourth such case that the commission has brought since December, and more than anything else, it demonstrates our commitment to bringing even foreign fraudsters to justice here in the U.S.”

The complaint further alleges that on several occasions the defendants opened new online brokerage accounts using stolen personal information, and then funded these accounts using hundreds of thousands of dollars taken from the accountholders’ own bank accounts. On other occasions, securities held in the victims’ online brokerage accounts were liquidated in order to finance the unauthorized trading.

The commission’s action seeks preliminary and permanent injunctive relief, disgorgement of illegal proceeds with prejudgment interest, and civil monetary penalties based on the alleged violations of the antifraud provisions of the federal securities laws.

The federal indictment involves one count of conspiracy, eight counts of computer fraud, six counts of wire fraud, two counts of securities fraud, and six counts of aggravated identity theft each against two of the defendants. It also involves one count of conspiracy, two counts of computer fraud, and two counts of aggravated identity theft.

The conspiracy and computer fraud charges each carry a maximum sentence of five years in prison. Wire fraud and securities fraud carry maximum sentences of 20 and 25 years, respectively. Each count of aggravated identity theft adds two years in prison, with at least one of those terms running consecutively with the sentences for the other charges.

The indictment resulted from an investigation by the Federal Bureau of Investigation, the U.S. Attorney’s Office for the District of Nebraska, and the Computer Crimes and Intellectual Property and Fraud Sections of the Criminal Division of the United States Department of Justice.

Two of the defendants have been arrested in Hong Kong, whereas the third individual remains at large. The SEC says that the government will seek the extradition of the arrested defendants to face charges in Nebraska.

The commission acknowledges the assistance of the American Stock Exchange LLC, Boston Stock Exchange, Inc., Chicago Board Options Exchange, Inc., International Securities Exchange, Inc., NYSE Arca, Philadelphia Stock Exchange, Inc., and the NASD.