Kazakhstani National Pleads Guilty to Money Laundering for Hack and Dump Scheme

WASHINGTON—Daniyar Zhaxalyk, 25, a citizen of Kazakhstan who entered the United States on a student visa, pleaded guilty today in Houston to one count of money laundering, announced Assistant Attorney General Lanny A. Breuer of the Criminal Division and U.S. Attorney Kenneth Magidson for the Southern District of Texas.

Zhaxalyk pleaded guilty before U.S. District Judge Ewing Werlein, Jr. in the Southern District of Texas. Zhaxalyk and three co-conspirators were charged in an indictment filed in the Southern District of Texas and unsealed in December 2011.

Zhaxalyk admitted to laundering funds generated in a sophisticated “hack and dump” stock scheme that caused more than $400,000 in losses. The indictment charged that Zhaxalyk’s co-conspirators illegally accessed brokerage accounts to engage in a stock fraud scheme in which the compromised accounts were used to purchase borrowed shares of stock at above-market prices from the defendants’ personal brokerage accounts. Zhaxalyk’s co-conspirators then allegedly repurchased the borrowed shares at the considerably lower market price, returned the borrowed shares to the stock lender, and claimed as profit the difference between the market price and the inflated price paid by the compromised victim accounts. Zhaxalyk admitted that he received and made wire transfers and withdrawals of the funds generated from the fraudulent stock sales and supervised other Houston-based students recruited into the scheme to launder funds.

A co-defendant, Alexey Li, also a citizen of Kazakhstan who entered the United States on a student visa, previously pleaded guilty in Houston on March 2, 2012 and is awaiting sentencing. Two other defendants remain at large.

At sentencing, Zhaxalyk will face a maximum penalty of 10 years in prison and a $250,000 fine.

This case was investigated by the St. Louis, San Francisco, and Houston Offices of the FBI. The case is being prosecuted by Trial Attorney Ethan Arenson of the Computer Crime and Intellectual Property Section in the Justice Department’s Criminal Division and Assistant U.S. Attorney Mark McIntyre of the Southern District of Texas.