Quote:Thai-based Indians 'hacked US stocks'

Washington (Agencies) - Three men from India have been indicted on federal charges of hacking into US-based online brokerage accounts from a cyberbase in Thailand.

The 23-count indictment, returned in January and unsealed Monday, charges Jaisankar Marimuthu, 32, and Chockalingam Ramanathan, 33, both of Chennai, India, each with one count of conspiracy, eight counts of computer fraud, six counts of wire fraud, two counts of securities fraud, and six counts of aggravated identity theft as part of this "hack, pump and dump" scheme.

The indictment also charges Thirugnanam Ramanathan, 34, a native of India and resident of Malaysia, with one count of conspiracy, two counts of computer fraud and two counts of aggravated identity theft, the DOJ said. Marimuthu and Thirugnanam Ramanathan have been arrested in Hong Kong.

US government investigators said the accounts were operated by TD Ameritrade Holding Corp., E-Trade Financial Corp. and others. The alleged hackers sought to inflate stock values and their own profits.

The alleged "hack, pump and dump" scheme has cost one brokerage firm at least $2 million in losses, prosecutors said. An estimated 60 customers and nine US brokerage firms, including Ameritrade, E-Trade and OptionsXpress, were duped in the case during a four-month period last year, according to the Justice Department.

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.

The three supects bought stocks through the US online firms with their own accounts, according to the 23-count indictment returned in January and unsealed Monday in Omaha, Nebraska.

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 DOJ has identified more than 60 customers and nine brokerage firms in the US and elsewhere as victims, with one of the brokerage firms reporting more than US US$2 million in losses. This case is the first time that individuals have been arrested overseas in connection with an online brokerage intrusion scheme perpetrated in the US, the DOJ said.

In a related action, the SEC filed a civil complaint against all three defendants Monday.

Between July and November, the defendants, operating primarily from Thailand and India, used their personal online brokerage accounts to purchase shares of several thinly-traded stocks, according to the indictment.

They then hacked into online brokerage accounts of others, using stolen user names and passwords, or established new brokerage accounts using stolen identities, the DOJ said. Using these accounts, the defendants made several unauthorised purchases of the same stocks to drive up the market price. Once the share prices were artificially inflated, the defendants sold their own shares for a substantial profit.

For example, Marimuthu placed orders on Aug. 28 through his personal online brokerage account, for 32,000 shares of stock at prices from US$2 to US$3.20 per share, the DOJ said. Chockalingam Ramanathan also placed an order through his personal online brokerage account to purchase 450 shares of the same stock for US$3.20 per share.

The same day, the defendants gained unauthorised access to the online brokerage account of an unsuspecting investor, according to the indictment. They then used this account to illegally acquire 26,000 shares of the same stock at prices from US$2.84 to US$3.40 per share, causing the stock's trading volume to rise to more than nine times its 15-day average.

Marimuthu then sold more than 30,000 shares of the stock at a substantial profit by Aug. 29, the DOJ said.

Marimuthu was arrested on Dec. 20, by Hong Kong police on charges of computer fraud, money laundering and possession of equipment to make a false instrument. These Hong Kong charges are for crimes similar to those in the US indictment. Thirugnanam Ramanathan was arrested by authorities in Hong Kong on Jan. 26, at the request of the US Chockalingam Ramanathan is at large.

The US government will seek the extradition of the arrested defendants to face charges in Nebraska, the DOJ said.

The conspiracy and computer fraud charges in this case each carry a maximum sentence of five years in prison. Wire fraud and securities fraud carry maximum sentences of 20 years and 15 years respectively. Each count of aggravated identity theft adds two years in prison.