Hackers penetrate online brokers
Customer accounts at online brokers including
ETrade Financial Corp. and TD Ameritrade Holding Corp. have been infiltrated by
computer hackers in one of the biggest cases of identity theft to strike the
U.S. securities industry.
Customer accounts at online brokers including ETrade Financial Corp. and TD Ameritrade Holding Corp. have been infiltrated by computer hackers in one of the biggest cases of identity theft to strike the U.S. securities industry.
The FBI, the Securities and Exchange Commission and the NASD are trying to unravel the fraud, which has cost New York-based ETrade at least $18 million and caused losses at Ameritrade of Omaha, Neb., company officials said. In one "pump-and-dump" scheme the SEC uncovered, thieves used customers' money to drive up the prices of little-traded stocks and then sold shares they bought earlier at a profit.
"The perpetrators were more organized, and it was a bigger issue this quarter than it had ever been before," ETrade Chief Operating Officer Jarrett Lilien said in an interview. "It wasn't just hitting one company, it was hitting everybody."
ETrade Chief Executive Mitchell Caplan told investors that investigators traced the illicit trading to "concerted rings" in Eastern Europe and Thailand. The company hasn't determined whether the reimbursement costs will be covered by insurance, he said. TD Ameritrade also was targeted by cyber-criminals in Eastern Europe and Asia, spokeswoman Becker said.
The online version of the "pump-and-dump" fraud sets off few security alerts at brokerage firms because no money is withdrawn from the compromised accounts, Walsh explained.
"This is an increasingly popular variation," he said in Phoenix. "If you are looking for a single 'hot topic' in the world of identity theft, this is it."
In "alias fraud," a thief opens an account in an individual's name, then uses it for illegal trading or money-laundering. Because the victim's name is on the account, he or she appears responsible for the crimes.
Walsh said the SEC recently began a "sweep examination" of brokerage firms to determine if they have adequate technology and staff training to prevent and detect online fraud.
Read your statements. Read everything.
The crooks have become globalized as quickly as have "legitimate" businesses. Too bad, policing doesn't keep up. You have to wonder about which countries are complicitly involved.
Posted: Tue - October 24, 2006 at 09:36 AM