Trading on Disaster: How Online Trading Can Lead to Identity Theft

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Imagine this:  You go online to check the balance in your brokerage account.  You discover it’s much lower than you expected.  You notice stock trades that you didn’t execute and wire transfers to outside accounts that you don’t recognize.  When you call your broker to correct the mistakes, what you find out isn’t reassuring. He says you’re a victim of identity theft and online trading fraud.

It’s happening every day, according to law enforcement officials around the world.  Cybercriminals are stealing user names and passwords so they can access online trading accounts directly and also observe how traders give instructions to their brokers via email. Then they’re using that information to make unauthorized trades, wiring the profits to other banks before their victims notice.

Weak Online Security: Playing Russian Roulette with Your Identity

This spring, a Russian national living in Brooklyn was arrested and charged with doing just that – committing wire fraud, unauthorized access to computers and securities fraud.  According to the complaint filed by the U.S. Attorney’s office in Newark, New Jersey, in 2010, Petr Murmylyuk, 31, working with others, hacked into online accounts of several retail brokerage firms – including Fidelity, Schwab, Scottrade and E*Trade. Then they changed the phone numbers and email addresses of the compromised accounts to prevent the victims from noticing any unauthorized activity.  Once the hackers had control of the accounts, they used the victims’ stolen identities to open new accounts at other brokerage firms. Then they deliberately executed unprofitable securities trades in the victims’ accounts that benefitted the hackers.  In one version of the fraud, the government alleges they sold options contracts from victims’ accounts to the profit accounts.  Then, minutes later, they bought back the same contracts for up to nine times the price.  The complaint says that Murmylyuk and a conspirator used foreign nationals in the U.S. to open bank accounts where $1 million in profits from the sham trades could be deposited.  And when he was arrested last year, Marmylyuk had a laptop that contained evidence of the crimes.

 

Russian Speaking Nations Dominate Cybercrime

The sheer brazenness and scope of the Russian cybercrime caper may seem out of the ordinary.  But in reality it’s just the tip of the iceberg.  Russian speaking nations dominate global cybercrime. And their crimes nearly doubled last year, according to a 2012 report by Group-IB, a Russian cybercrime investigation and computer forensics company. Russian speaking hackers earned an estimated $4.5 billion by committing a variety of online crimes.  That makes them responsible for 36% of the estimated $12.5 billion stolen by cybercriminals in 2011.  Why the big increase? Group-IB found that the Russian mafia’s traditional emphasis on drug and arms trafficking has shifted to cybercrime. On top of that, members of the previously disorganized Russian cybercrime market are beginning to work more closely together, sharing compromised data and cashing schemes.

That’s bad news for everyone who accesses personal information and trades securities online.  Securities regulators in the U.S., Canada and Australia have recently seen a number of cases involving investor funds being stolen through hacked email accounts and hacked trading accounts.

 

Watch Out for  the Signs of Identity Theft When You’re Online

 

According to the New Brunswick Securities Commission in Canada, the tell-tale signs that your email has been hacked include reports of spam from people in your contacts folder or a bunch of bounced email messages from people you don’t know. You may also discover that your password or account settings have been changed or you’ve been blocked from accessing your account.  If you’re not getting trade confirmations or statements that you normally receive from your brokerage firm, that’s another warning sign that you may be the victim of identity theft.

 

If you suspect your email account or your online trading account has been hacked, immediately change user names, passwords and PINs for  all your online financial accounts.  Ask your investment firm to investigate any unauthorized activity.  Contact all your financial institutions and inform them that your information may have been stolen by hackers.

 

Beef Up Your Online Security to Ward Off Hackers

Be sure to check out our May blog for more online security tips for traders:

And remember, the best privacy protection against hackers is a wireless VPN like PRIVATE WiFi™.  Virtual private networks hide the information traveling to and from your computer by making it invisible to hackers.

 

 

Get Private Wifi   Protect your personal information.
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Jan Legnitto

Jan Legnitto is an investigative journalist and documentary producer who writes about criminal justice and intelligence issues. Jan is also a frequent contributor to the Private I blogs.