The SEC has also begun proceedings against four electronic trading firms and eight executives, accusing them of enabling the scam by allowing the Latvian, Igors Nagaicevs, "anonymous and unfiltered access to the US markets".

According to the SEC complaint filed in federal court in San Francisco, Nagaicevs broke into online accounts of customers at large US broker-dealers and drove stock prices up or down by making purchases or sales. He did this around 150 times over 14 months, causing more than $2 million in harm to customers.

Nagaicevs - using the direct, anonymous market access provided to him by unregistered firms - then traded those same securities at artificial prices and reaped more than $850,000 in illegal profits.

Marc Fagel, director, San Francisco regional office, SEC, says: "Nagaicevs engaged in a brazen and systematic securities fraud, repeatedly raiding brokerage accounts and causing massive damages to innocent investors and their brokerage firms."

The four firms - Alchemy Ventures, KM Capital Management, Zanshin Enterprises and Mercury Capital - are accused of providing him a gateway, circumventing securities laws by letting him trade online through accounts in their names.

Daniel Hawke, chief, market abuse unit, SEC, says: "By failing to register as brokers, the firms and principals in this case exposed US markets to real harm by evading crucial safeguards of the federal securities laws. We will not allow firms like these to fly under the radar and become safe havens for market abuse."

Mercury Capital and two of the eight executives have settled with the SEC.

Meanwhile, another US watchdog, the Financial Industry Regulatory Authority (Finra), has issued a warning to investors about an e-mail hacking scam that has seen crooks gain access to brokerage accounts and wire money out of them.

Finra says it has received an "increasing number" of reports involving investor funds being stolen by fraudsters who first gain access to the investor's e-mail account and then use them to send instructions to the firm to transfer money out.

"Investors who suspect that their email account has been hacked should immediately notify their brokerage firm and other financial institutions, and anyone who suspects they have been defrauded should file a complaint with Finra," urges Gerri Walsh, VP, investor education, Finra.