Hack, Pump And Dump
Friday, January 26, 2007
Aleksey Kamardin reaped $13,158 in just 104 minutes buying and selling penny stocks.
The 21-year-old bought 43,000 shares in a small Wisconsin equipment company that makes, among other things, potato harvesters. He sold the shares less than two hours later at nearly double the investment.
But Kamardin's is no success story. Instead, federal authorities say, his methods place him at the front of a wave of techno-criminals who meld computer hacking with identity theft to create nightmares for legitimate investors.
Kamardin and his accomplices allegedly hacked into four online trading accounts of unsuspecting investors, selling off their holdings in higher-valued companies to purchase shares in Thomas Equipment, a firm whose stock that day soared from 26 cents to 80 cents a share, authorities said. The trading volume of Thomas increased tenfold.
Kamardin, allegedly part of an East European ring, repeated this scheme on 13 other occasions in July and August, defrauding investors of $82,960, according to a civil complaint filed yesterday by the Securities and Exchange Commission.
The complaint is one of the first the SEC has brought in response to an emerging trend of the digital era: a modern version of the old pump-and-dump stock scam.
"You wake up in the morning and all your blue chips are gone, and instead you own a microcap stock that is virtually worthless," said John Reed Stark, chief of the SEC's Office of Internet Enforcement. Stark added that he expected more complaints in the coming weeks, saying, "This is an area where we've become increasingly concerned."
The FBI is also investigating the case, which involved at least 27 accounts and 14 companies at brokers E-Trade Securities, Scottrade, TD Ameritrade, J.P. Morgan Chase and Charles Schwab. All the investors have been reimbursed by the brokers, which have been stepping up security and identity authentication measures, SEC officials said.
Kamardin, a U.S. citizen with a liquid net worth of $15,000, according to his E-Trade account application, is believed to have fled to Russia, the SEC said. He has no attorney, authorities said.
On Aug. 21 last year, Kamardin booted up his computer in his apartment in Tampa and logged into his E-Trade account, according to the SEC complaint, which forms the basis for the following account.
At 2:10 p.m. he bought 43,000 shares of Thomas Equipment.
Between 1:29 p.m. and 3:41 p.m., an intruder -- either Kamardin or an accomplice -- hacked into two TD Ameritrade accounts, using those investors' stocks to buy 60,900 Thomas Equipment shares.