MARKET SCAMS

[HHUGHES]

3 Indian men indicted in brokerage hacking scheme that affected Ameritrade, E-Trade and others
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Three hackers from India have been indicted in the U.S. on charges of conspiracy and fraud for accessing dozens of online brokerage accounts to jack up stock prices and reap more than $120,000 in illegal profits.
The alleged "hack, pump and dump" scheme cost one brokerage firm at least $2 million in losses, the Justice Department announced Monday. An estimated 60 customers and nine U.S. brokerage firms, including Ameritrade Holding Corp., E-Trade Financial Corp. and OptionsXpress, were duped in the case during a four-month period last year.
The three suspects bought stocks through the U.S. online firms with their own accounts, according to the 23-count indictment returned in January and unsealed Monday in Omaha, Neb.
Operating from Thailand and India, the men then allegedly used stolen identity information to pose as other online share-buyers, inflating the value of myriad securities, including those of search engine giant Google Inc.
The men later sold their own shares at a higher price, turning a profit of more than $121,500, according to the Securities and Exchange Commission, which filed separate civil charges against all three men in federal court in Nebraska.
One victim had $180,000 cash and equity in his account, and five days later returned from a trip to find a negative $200,000 balance, according to the SEC.
A spokesman for OptionsXpress Holdings Inc. declined to say how much it lost in the scheme or how long the Chicago-based firm had been working with government investigators.
But John Reed Stark, chief of the SEC's Office of Internet Enforcement, praised the online brokerage community's cooperation, which included responding to requests for information in real-time since the scammers can manipulate online accounts from nearly anywhere on the planet.
Two of the three suspects _ Jaisankar Marimuthu, 32, of Chennai, India, and Thirugnanam Ramanathan, 34, an Indian native who lives in Malaysia _ were arrested in recent weeks in Hong Kong, the Justice Department said. The third, Chockalingam Ramanathan, 33, also of Chennai, India, is still at large.
The indictment by the Nebraska grand jury included charges of conspiracy, computer, wire and securities fraud and aggravated identity theft.
The case marks the first time hackers suspected of defrauding U.S.-based online brokerage firms have been arrested overseas, the Justice Department said. Assistant Attorney General Alice Fisher said such cases "pose serious risks to investors and brokerage firms across the globe."
The SEC has brought two other account intrusion cases since December, involving defendants in Estonia and Latvia.
New York-based E-Trade spent about $18 million in the third quarter of last year on fraud losses. About $8 million of that was to reimburse customers whose accounts had been hacked, including some cases from the indictment, said company spokeswoman Pam Erickson, declining to be more specific. Since last year, E-Trade has installed monitoring controls to alert customers of any unusual activity in their accounts.
Omaha, Neb.-based Ameritrade spent $4 million in the July-September quarter last year to reimburse customers whose accounts had been used for unauthorized transactions, said spokeswoman Kim Hillyer. She declined to provide any more details about those charges or losses incurred from transactions detailed in the indictment.
Both companies said their systems never have been penetrated and that the hacking affects customer accounts and computers.
Shares of Ameritrade slipped 14 cents to close at $15.51, while E-Trade added 8 cents to $22.80, and OptionsXpress rose 18 cents to $23.33, all on the Nasdaq Stock Market.