A trader at the IDB group's Clal Finance who allegedly took NIS 15 million in illicit profits was arrested this week on suspicion of securities fraud.
Arieh Lantsberg is accused of front running – illegally taking advantage of advance knowledge of pending orders by his company and its major customers, which in Clal's case include most of the country's big institutional investors.
Lantsberg, who deals in nostro accounts – the investment house's own investment account (as opposed to accounts invested on behalf of customers) – is said to have made NIS 15 million between 2008 and 2013 from this alleged front-running scheme.
His gains, and those of his two alleged partners, came at the expense of Clal's brokerage service and other investors, authorities say. Clal's brokerage room carries out transactions for most of the country's major institutional investors – meaning the public's pension and investment funds.
According to investigators, Lantsberg gathered information about which accounts Clal Finance intended to buy for its own portfolio and for its major investors, and then shared that information with his two alleged partners, who bought the securities in advance.
When Clal bought the securities as planned, it boosted their prices, authorities say. At this point Lantsberg allegedly instructed his partners to sell the securities, often to Clal or other institutional investors using its brokerage service, thereby guaranteeing Lantsberg and his partners profits at the institutionals' expense.
Clal stated in a letter to customers that it had no knowledge of the suspected fraud, and stressed that the company itself is accused of no wrongdoing. CEO Yoram Naveh noted this week that the company was cooperating with the Israel Securities Authority.
Lantsberg was detained along with two friends, attorney Guy Maguri Cohen and Haim Langer, an employee of Nice – which offers, among other things, financial services. All three were released, with restrictions, after a full day of questioning by the Israel Securities Authority.
They stand accused of securities fraud, accepting bribes, aggravated fraud, breach of trust and tax offenses.