Scam of the day – December 29, 2016 – Chinese hackers charged with securities fraud

It didn’t take long for one of my cyberpredictions for 2017 to be realized.  In fact, it actually happened in the waning days of 2016.  My prediction, as found in my recent column for USA Today and here in, predicted that law firms would be targets for hackers seeking inside information from them about their large corporate clients that may be considering mergers or takeovers of other companies.  Using this non-public information, a savvy hacker could trade in the stock of these companies and make tremendous profits before the information about the mergers or acquisitions became known by the public and drove up the price of the stocks.

Recently a thirteen count indictment was unsealed in which three Chinese defendants are alleged to have hacked into the computers of at least seven law firms involved with mergers and acquisitions and stole confidential inside information about impending mergers and takeovers that enabled the hackers to buy stock in these companies before the knowledge of the impending mergers became public and then sell their stock at tremendous profits when the news of the mergers became known.  It is estimated that the hackers made profits of more than four million dollars using this information.  The SEC has also brought a civil action against the three defendants.

Among the companies involved with mergers or takeovers that the hackers are alleged to have profited from using this confidential information were InterMune, a biotech company, Intel, Altera, Pitney Bowes and Borderfree.  On the Pitney Bowes takeover of Borderfree alone, the hackers were able to achieve a profit of more than 105% by purchasing Borderfree stock before the announced takeover and selling soon after the takeover was announced.


For law firms and other companies, this should be another wake up call to provide better security.  The major hacking of a law firm that resulted in the leaking of what has become known as the Panama Papers should have been sufficient notice that law firms and other companies and agencies that hold sensitive and confidential information must take the necessary steps to protect their data better.

For the rest of us as individuals, this should serve as a reminder that our own cybersecurity is inexorably tied to all of the companies and governmental agencies that hold our personal information.  Whenever possible, you should limit the amount of personal information that you provide any company or governmental agency.  For instance, your physician does not need your Social Security number although they often ask for it.

Finally, security begins at home and you should make sure that you are protecting your cybersecurity as best you can by not clicking on links in emails unless you have verified that the communication is legitimate, installing and constantly updating your security software, using unique strong passwords for all of your accounts, using strong security questions, using dual factor authentication and encrypting your communications.

Scam of the day – May 20, 2016 – First criminal conviction in massive securities fraud scheme

I have been reporting to you about developments in this ingenious and massive stock fraud since last summer when the story first broke.   Forty-three people were charged both civilly and criminally in the largest hacking and securities fraud enterprise in American history.  The defendants were made up of rogue stock traders including hedge fund manager and former Morgan Stanley employee Vitaly Korchevsky along with computer hackers based in the Ukraine.  The hackers used simple phishing tactics to gain access to more than 150,000 press releases issued by Marketwired, PR Newswire in New York and Business Wire of San Francisco on behalf of numerous American companies including Panera, Caterpillar, Inc and Align Technology that contained earnings and other corporate information prior to their public release.  This enabled the rogue stock traders to make trades based on this inside information before it became known to the public.  Trades using this stolen information were made by traders in Russia, Ukraine, Malta, Cyprus, France and here in the United States in Georgia, New York and Pennsylvania  It is estimated that between 2010 and 2015, the defendants made profits of  as much as 100 million dollars on 800 trades during this time.  A number of the civil defendants have already pleaded guilty to charges related to this scam, but earlier this week, Vaym Iermolovych became the first person involved to plead guilty to criminal charges in regard to this scam.

The cornerstone of this scam as so many cyberscams was the ability to hack into the company computers of Marketwired, PR Newswire and Business Wire by hacking into social media sites where they stole the passwords of employees of these companies who used the same passwords at work.  The scammers also used spear phishing emails to gain the further access they needed to infiltrate the computers of the targeted companies.


One of the biggest takeaways from this case is how easy it is to still use spear phishing emails to lure people into clicking on links tainted with malware that permits hackers to steal a person’s or company’s data.  Apparently corporations still have not learned to sufficiently train their employees to recognize phishing emails nor have they learned to encrypt and segregate sensitive data from hackers.   In addition, this case also illustrates the danger of using the same password for all of your accounts.  This is important to all of us as individuals because identity thieves and hackers use the same phishing techniques to hack into the computers of us as individuals and steal our personal information.  Never click on links in emails regardless of from whom they appear to come unless you are absolutely sure that the link is legitimate.  It well could contain keystroke logging malware that will steal all of the information from your computer.  Also, it is important to remember that you cannot rely on your anti-malware software to protect you because the best anti-malware software is always at least a month behind the latest malware.  However, it is still important to have security software on all of your electronic devices and keep that software up to date with the latest security patches because many scammers use older versions of malware for which there are defenses.

Finally, this case also reminds us to use unique passwords for all of our accounts so that if our password is compromised at a company with lax security, our own security at other places where we use passwords is not threatened.   Although it may seem difficult to have to remember so many different password, an easy way to deal with this is to have a strong base password that contains capital letters, small letters and symbols and adapt that base password for each of your accounts.  Using an easily remembered phrase as the base password such as IDon’tLikePasswords is effective.  Make it even better by adding a couple of symbols at the end such as IDon’tLikePasswords!!! and then adapt it for each of your accounts so, for instance, your Amazon account password would be IDon’tLikePasswords!!!AMA.

Scam of the day – October 20, 2015 – Update on Dow Jones data breach

A week ago in the October 13th Scam of the day I informed you about the hacking of Dow Jones & Co., the publisher of The Wall Street Journal, MarketWatch and Barron’s. This data breach went all the way back to August of 2012 but was not identified until July of 2015.  There has been much speculation about the goal of the hackers as they did not attempt to reach much in the way of personal information.  Now Bloomberg is reporting that the FBI, Secret Service and SEC are investigating the possibility that the hacking, which they are presently attributing to unidentified Russian hackers may have been done to obtain insider information that could be used before it would be made public for purposes of profitably trading stocks.  This certainly is not as far fetched as it may initially appear.  As regular readers of Scamicide will remember, in the September 20th Scam of the day I reported to you about the SEC settling civil charges against two defendants who used this same type of tactic of stealing inside information to make stock trades.  In that case, the defendants made 23 million dollars by hacking into public relations companies Marketwired, PR Newswire and Business Wire to learn  inside corporate information before these companies could release the information to the public through press releases.  In regard to Dow Jones’ publications, early access through hacking to information about mergers and acquisitions as well as other corporate information could well be exploited to make profitable stock trades based on this inside information before it became known by the public.


Scam artists are the only criminals whom we refer to as artists and they are constantly coming up with new ways to turn hacking into profits.  Companies have got to start doing a better job of recognizing that they are targets and protect their data better.  I will report to you about future developments in this story as they occur.

Scam of the day – June 30, 3015 – SEC and Secret Service investigating insider trading data breach

The Securities and Exchange Commission (SEC) and the Secret Service are investigating data breaches at about sixty companies in the biotechnology, medical instruments, hospital equipment and pharmaceutical drug fields that appear to have been going on since 2013.  The information stolen in these data breaches appears to have been used by the hackers, who have been identified as FIN4 by the security company FireEye, which first uncovered the hacking last year, for purposes of insider trading.  The hackers focused on executives within the targeted companies that had information about mergers and acquisitions as well as other information useful in predicting the movement of the stocks of these companies on the stock exchanges.  Insider trading on non-public information that moves a stock’s price is illegal.


At this point in time we do not know whether the hackers are Americans or are launching the attacks from somewhere outside of the country.  Although the evaluation and use of the precise information sought and stolen indicates that the hackers are quite sophisticated both in the health care industry and in financial markets, the manner by which the information was stolen was quite basic.  They used phony Microsoft Outlook login pages to trick the targeted individuals into providing their user names and passwords.  They would then view private emails and even, on some occasions interject themselves into email conversations in order to gather useful information.  Although this is particularly troublesome, regulators should be able to identify who made trades at opportune times and ultimately find the hackers.

Scam of the day – August 8, 2014 – Pump and Dump indictments in New York

Recently, Federal criminal charges were brought against seven people including Abraxas Discala, the former husband of actress Jamie-Lynn Sigler, from the HBO series, “The Sopranos.”  The seven people indicted were charged with running a three hundred million dollar “pump and dump” investment scam that cheated many investors including many elderly people.  In a pump and dump scheme, which is often done with low priced stocks referred to as “penny stocks,” the scammers artificially inflate the price of the stocks by using text messages, faxes, Internet chat rooms and other means of communication posing as inside information indicates that a stock is about to rise.  This prompts victims of the scam to buy the stock and temporarily inflate the value of the stock.  Meanwhile, the scammers sell their stock when the stock price gets bumped up and are long gone when the stock deflates when it reverts back to its true value.  The four companies involved in this particular pump and dump scam, according to U.S. Attorney Loretta Lynch were CodeSmart Holdings, Inc., Cubed, Inc. StarStream Entertainment Inc and Staffing Group Ltd.  The Securities and Exchange Commission also brought civil charges against five of the seven people indicted on the criminal charges.  According to the SEC, the value of the boost in the value of the targeted stocks initially reached three hundred million dollars, but then crashed causing losses to investors in CodeSmart Holdings, Inc alone of fifty million dollars.


Remember my motto, “trust me, you can’t trust anyone.”  You should never invest in anything unless you have carefully investigated the investment and understand it fully.  Stock trading based on unverified information you receive in a text message, fax or chat room is extremely risky and unreliable.  In addition, insider trading, which often is the lure in a pump and dump scam is illegal.