U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20816A / November 21, 2008
Securities and Exchange Commission v. Jaisankar Marimuthu, Chockalingam Ramanathan and Thirugnanam Ramanathan, Civil Action No. 8:07CV94 (D. Neb.)
OFFSHORE HACKER PERMANENTLY ENJOINED FROM FUTURE VIOLATIONS OF THE FEDERAL SECURITIES LAWS
The United States Securities and Exchange Commission today announced that on November 19, 2008 Thirugnanam Ramanathan, a native of Chennai, India, and legal resident of Malaysia, consented to the entry of a final judgment permanently enjoining him from violating Section 17(a) of the Securities Act of 1933, and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. In a related criminal action, Ramanathan was sentenced to a two year prison sentence followed by three years of supervised release and an order requiring him to pay $362,247 in restitution. Based on the sanctions imposed in the criminal proceedings, the defendant was not ordered to pay disgorgement or a civil penalty.
In January 2007, Ramanathan was indicted by a federal grand jury in Omaha along with his brother Chockalingam Ramanathan and Jaisankar Marimuthu, also residents of Chennai. Marimuthu and Chockalingam Ramanathan were charged 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. On May 25, 2007, Thirugnanam Ramanathan was arrested in Hong Kong and extradited to the United States. On July 2, 2008, Ramanathan pleaded guilty to one count of conspiracy to commit wire fraud, securities fraud, computer fraud and aggravated identity theft. Marimuthu is currently being detained in a Hong Kong prison awaiting extradition to the U.S. following his conviction there on similar offenses but related instead to the Hong Kong stock market. Chockalingam Ramanathan remains at large.
On March 12, 2007, the SEC filed a complaint in the United States District Court for the District of Nebraska charging all three Indian nationals with participating in a fraudulent scheme to manipulate the prices of at least fourteen securities through the unauthorized use of other people's online brokerage accounts.
The Commission's complaint alleges that, between July and November 2006, Jaisankar Marimuthu, Chockalingam Ramanathan and Thirugnanam Ramanathan hijacked the online brokerage accounts of unwitting investors using stolen usernames and passwords. Prior to intruding into these accounts, the defendants acquired positions in the securities of at least thirteen issuers and options on shares of another issuer. Then, without the account holders' knowledge, and using the victims' own accounts and funds, the defendants placed scores of unauthorized buy orders at above-market prices. After these unauthorized buy orders were placed, the defendants sold the positions held in their own accounts at the artificially inflated prices netting unlawful trading profits of at least $121,500. These transactions created the appearance of legitimate trading activity and pumped up the share price of the fourteen securities.
The Commission wishes to acknowledge the assistance and cooperation it received in bringing this case from the Computer Crimes and Intellectual Property section, Fraud section and Office of International Affairs in the Criminal Division of the Department of Justice, along with The United States Attorney's Office for the District of Nebraska, The Federal Bureau of Investigation, Omaha and Detroit offices, The Omaha office of Immigration and Customs Enforcement, and the Financial Industry Regulatory Authority.
The Commission's Office of Investor Education and Assistance has previously issued an investor alert, available on the Commission's website, which provides tips to avoid becoming a victim of online intrusions. See http://www.sec.gov/investor/pubs/onlinebrokerage.htm.