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SEC Takes Action Against Latvian Hacker 57

Posted by timothy
from the latvia-lady-toniiight dept.
wiredmikey writes "The SEC has filed charges against a trader in Latvia for conducting a widespread online account intrusion scheme in which he manipulated the prices of more than 100 NYSE and Nasdaq securities by making unauthorized purchases or sales from hijacked brokerage accounts. The SEC also went after four online trading firms and eight executives who are said to have helped the hacker make more than $850,000 in ill-gotten funds. The SEC's actions occurred on the same day that the Financial Industry Regulatory Authority (FINRA) issued an investor alert and a regulatory notice about an increase in financially motivated attacks targeting email."
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SEC Takes Action Against Latvian Hacker

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  • Now, all of you other big smartie investor types, quit falling for phishing scams!

  • What a deterrent (Score:5, Insightful)

    by elrous0 (869638) * on Monday January 30, 2012 @09:16AM (#38863873)

    Two of the associates working for two of the named firms agreed to settle for $35,000 each in fines.

    And the SEC wonders why people keep doing this sort of thing. I bet those two guys (and many other not charged) walked away with millions.

    • I'll Take Your Wager (Score:5, Interesting)

      by eldavojohn (898314) * <.moc.liamg. .ta. .nhojovadle.> on Monday January 30, 2012 @09:24AM (#38863903) Journal

      And the SEC wonders why people keep doing this sort of thing. I bet those two guys (and many other not charged) walked away with millions.

      According to the court filing [sec.gov]:

      Nagaicevs generated more than $850,000 in illegal profits from this scheme. His unauthorized trading in the hijacked accounts also caused losses in excess of $2 million which were reimbursed by the broker-dealer firms that carried the victimized customer accounts.

      So how did the firms that the associates work for 'walk away with millions' when Nagaicevs got $850,000 and the total losses to the accounts was over $2 million? I'm guessing that since the firms that those associates worked for reimbursed those accounts that those two associates are facing some pretty upset employers. Is that really worth a couple hundred thousand?

    • by Anonymous Coward

      The guy who committed the fraud only made $850,000. How exactly do you make millions in brokerage off $850k in trade profits (yes, I know profitability of trades has no relation to brokerage, but this was a scam that presumably made a very high return). More reasonably, the firms involved made a few hundred thousand, tops, which they almost certainly had to forfeit, before any fines were levied. And the $35k was paid out of pocket by two individual brokers, and I'd guarantee it was more than they made of

    • by DaveGod (703167)

      Two of the associates working for two of the named firms agreed to settle for $35,000 each in fines.

      And the SEC wonders why people keep doing this sort of thing. I bet those two guys (and many other not charged) walked away with millions.

      I was of the understanding that the proceeds of crime were treated vaguely similar to that in the UK - basically the fine is what happens on top of the seizure of your ill-gotten gains, and anything else that can be linked to your crime.

      The seizures are often (over here) separate from the court case where they are convicted. There was even a case on the news recently where people got their assets seized permanently even though they were not convicted. I gather the point was that it was difficult to prove th

  • by eldavojohn (898314) * <.moc.liamg. .ta. .nhojovadle.> on Monday January 30, 2012 @09:16AM (#38863875) Journal
    It was really clear to me how he was precisely doing this for his own gain but here's a PDF of the 15 page court proceedings that goes into detail [sec.gov] (section B is the informative part). Essentially within one single trading day he would establish a long or short position through one of the unregistered trading firms. Then in that day he would gain illegal access and, if he had to, sell securities to beef up the cash in the account and then make trades that would cause his long or short to payoff. Then he'd pull it all out from the original account. He would often complete this cycle in 15 to 20 minutes and, as a result, he'd often be responsible for more than 50% of that stock's trading volume for that day. It's interesting, they go in to the details of a GBX stock and how the price changes are 10 to 50 cents (on ~$10 per stock).
    • by daktari (1983452)

      Preventing manipulation of the market might very well be the reason that FINRA issued the advisory and would be taking this seriously. According to the article:

      As of December 2011, the attempted fraud amounts total approximately $23 million; the actual victim losses are approximately $6 million.

      $23 million in attempted fraud up until Dec 2011 seems like peanuts to me.

      • by dkf (304284)

        As of December 2011, the attempted fraud amounts total approximately $23 million; the actual victim losses are approximately $6 million.

        $23 million in attempted fraud up until Dec 2011 seems like peanuts to me.

        Actual fraud of $6M isn't peanuts; people go to prison for a lot less. Sure, there might be even bigger fish about as well, but that doesn't make it any less important to pursue this case. Letting scum get away with it encourages them to commit greater villainy.

        • by daktari (1983452)

          Remember that this figure includes all attempted fraud of this kind to date. Compare this to credit card fraud [wikipedia.org]:

          The cost of card fraud in 2006 were 7 cents per 100 dollars worth of transactions (7 basis points). Due to the high volume of transactions this translates to billions of dollars. In 2006, fraud in the United Kingdom alone was estimated at £535 million, or US$750–830 million at prevailing 2006 exchange rates.

          So, yes, $6m in actual cost to victims seems very low.

          Never did I suggest letting unsavory individuals get away with their crimes. Merely suggesting that the powers that be might be more concerned with the market being played and causing much more damage than the obvious cost of siphoned funds to a few brokers.

  • Any basic pattern matching would show that this guy always bought tons of shares and sold tons of shares right around the hacked account buying tons of shares. How could you be intelligent enough to pull this off but so dumb as to create an easily traceable pattern?
  • by roman_mir (125474) on Monday January 30, 2012 @09:34AM (#38863959) Homepage Journal

    So when are they going to investigate the actual definition [wikipedia.org] of a pump and dump scheme [slashdot.org] ran by NIA [inflation.us], everything that they do, from Agria Corp (GRO) and Mega Precious Metals (MGP:CN) and now to Broadvision (BVSN) [yahoo.com]? They had plenty of notifications on this, it doesn't bother them or are they in on it?

    • So when are they going to investigate the actual definition [wikipedia.org] of a pump and dump scheme [slashdot.org] ran by NIA [inflation.us], everything that they do, from Agria Corp (GRO) and Mega Precious Metals (MGP:CN) and now to Broadvision (BVSN) [yahoo.com]? They had plenty of notifications on this, it doesn't bother them or are they in on it?

      I don't see absolutely anything wrong with Lebed did. He wasn't involved in any inside trading, and didn't have any more information on those companies than anybody else. He went on forums and bullshitted to get people to buy some stocks, but if you're buying stocks based on the advice of some dude in a forum without doing any of your own research...well, learn to take some responsibilities for your own actions and stop blaming others.

      • by Anonymous Coward

        If he's licensed and the information he gave is known to be incorrect, he violated the law. If he's licenses and gave information for the sole purpose of manipulating stock value, he violated the law.

  • Roarin' like a mouse, bitin' like a flea!
  • Oh, wow am I not impressed. They investigate, and nab, a hacker who caused a loss under a million bucks, while remaining virtually asleep at the wheel as SEC associates, flash traders, big time insiders and other "better positioned" criminal psychopaths virtually decimate our economy.
  • ...and thought Doc Doom had really fallen on hard times.

  • The SEC is a meaningless dog and pony show that is deliberately intended to as little as possible. It's goal is to give the illusion of oversight without interfering with the ability of the big inside players to steal as much money as they can get away with. Examples:

    Madoff. One word suffices. He was detected a decade before he finally took himself down, and the SEC went out of their way to not investigate. Why? Because he was an insider. The only reason he was caught was that the market went down, and hi

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