SEC and U.S. Attorney Charge Three Offshore Hackers with
Hijacking Online Brokerage Accounts, Manipulating Market
FOR IMMEDIATE RELEASE
2007-40
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
(202) 551-4892
starkj@sec.gov
Additional materials:
Litigation Release
No. 20037
