Romanian stock market brokerage firm Harinvest has been fined some EUR 137,000 and closed down by the financial regulators, after its clients were robbed of shares worth some EUR 1.2 million.

The brokerage firm, headquartered in the Romanian town of Ramnicu Valcea – the city which was nicknamed Hackerville by international media - is in the middle of the biggest fraud scandal on the Bucharest stock market in recent years.

Several clients were unable to withdraw their money and shares from Harinvest's accounts in November, only to realize everything was missing. So far, 44 clients have claimed a loss of some EUR 1.2 million. According to Romanian media, the situation was triggered by one of the company's traders, Maria Voinea, who allegedly sold shares from her clients' portfolios to cover losses after transactions with structured products, which have a high risk rate.

According to a report from the brokerage firm's administrators, one of the company's clients traded structured products without having money in their account, and did not want to bring money to cover their loss. So the trader tried to cover the loss by selling the portfolios of the other clients.

The employee managed to cover up the losses via a row of sell – out deals in the last year, so nobody suspected anything. The company's management and shareholders say they knew nothing about this, as the trader used fictitious papers to cover up the illegal transactions, so nothing appeared in the company's financials. The three people involved in the transaction are not allowed to work on this market segment for three to five years.

In the end, it was all uncovered in November, after Harinvest was unable to pay out a stock market deal as it did not have money in its account. The brokerage firm had to sell its shares it owned in the Bucharest Stock Exchange (BVB), in order to cover the EUR 500,000 transaction. The firm is now unable to pay back the money to the clients, and the clients' only hope is the Investors' Compensation Fund, which has an up to EUR 20,000 threshold.

The financial surveillance authority has started an investigation, and also called for a criminal investigation into the case.

editor@romania-insider.com