SEC and U.S. Attorney Charge Three Offshore Hackers with Hijacking Online Brokerage Accounts, Manipulating Market
FOR IMMEDIATE RELEASE
Indian Internet Intruders Charged with Making Unauthorized Purchases to Pump up Markets for Google Options, Sun Microsystems, Twelve Other Issuers
Washington, D.C., March 12, 2007 — Today the United States Securities and Exchange Commission announced the filing of civil charges against Jaisankar Marimuthu, Chockalingam Ramanathan and Thirugnanam Ramanathan, three Indian nationals who participated in a fraudulent scheme to manipulate the prices of at least fourteen securities through the unauthorized use of other people’s online brokerage accounts. One victim had $180,000 cash and equity in his online brokerage account before a five-day fishing trip only to find a negative $200,000 balance when he returned.
In a related action, the U.S. Department of Justice announced that a federal court in Nebraska today unsealed a twenty-three count indictment against the individuals charged in the Commission’s complaint.
“Hackers who prey on American investors—no matter what continent they’re operating from—are meeting their match with powerful adversaries in the Department of Justice and the Securities and Exchange Commission. We will go anywhere on earth to stop these thieves and hold them accountable,” said SEC Chairman Christopher Cox.
The SEC has brought four account intrusion cases since December, involving defendants in Estonia, Latvia and now, Hong Kong and Malaysia.
According to the Commission’s complaint, between July and November 2006, the Defendants repeatedly 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 fourteen securities, including Sun Microsystems, Inc., and “out of the money” put options on shares of Google, Inc. Then, without the accountholders’ 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, realizing profits of over $121,500.
“It is particularly troubling that, aside from profiting from their scheme, the Defendants caused over $875,000 in damage to the brokerage firms whose customers’ accounts were compromised,” said Linda Thomsen, Director of the SEC’s Division of Enforcement.
“The Commission is cracking down on these intrusions,” said Cheryl Scarboro, Associate Director of the SEC’s Division of Enforcement. “This is the fourth such case that the Commission has brought since December, and more than anything else, it demonstrates our commitment to bringing even foreign fraudsters to justice here in the U.S.”
The complaint further alleges that on several occasions the Defendants opened new online brokerage accounts using stolen personal information, and then funded these accounts using hundreds of thousands of dollars taken from the accountholders’ own bank accounts. On other occasions, securities held in the victims’ online brokerage accounts were liquidated in order to finance the unauthorized trading.
The Commission's action seeks preliminary and permanent injunctive relief, disgorgement of illegal proceeds with prejudgment interest, and civil monetary penalties based on the Defendants’ alleged violations of the antifraud provisions of the federal securities laws, 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 action, a federal court in Nebraska today unsealed a twenty-three count indictment charging both Marimuthu and Chockalingam Ramanathan 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. The indictment also charges Thirugnanam Ramanathan with one count of conspiracy, two counts of computer fraud, and two counts of aggravated identity theft. The conspiracy and computer fraud charges each carry a maximum sentence of five years in prison. Wire fraud and securities fraud carry maximum sentences of twenty and twenty-five years, respectively. Each count of aggravated identity theft adds two years in prison, with at least one of those terms running consecutively with the sentences for the other charges.
The indictment resulted from an investigation by the Federal Bureau of Investigation, the U.S. Attorney’s Office for the District of Nebraska, and the Computer Crimes and Intellectual Property and Fraud Sections of the Criminal Division of the United States Department of Justice.
Marimuthu was arrested on December 20, 2006 by the Hong Kong Police on charges there of computer fraud, money laundering, and possession of equipment to make a false instrument. These Hong Kong charges concern crimes similar to those charged in the U.S. indictment. Thirugnanam Ramanathan was arrested by authorities in Hong Kong on January 26, 2007 pursuant to a U.S. provisional arrest warrant. Chockalingam Ramanathan is at large. The government will seek the extradition of the arrested Defendants to face charges in Nebraska.
The Commission acknowledges the assistance of the American Stock Exchange LLC, Boston Stock Exchange, Inc., Chicago Board Options Exchange, Inc., International Securities Exchange, Inc., NYSE Arca, Philadelphia Stock Exchange, Inc., and the NASD.
For further information contact:
John Reed Stark
Chief, SEC Office of Internet Enforcement & Counselor to the Director
Additional materials: Litigation Release No. 20037