The FBI linked with Israel Police organized crime unit 433 to uncover a securities fraud scheme that has spanned the globe via the Internet from the U.S. to Israel and all the way to Russia.
Authorities also discovered that the “pump and dump” scheme had a connection with last October’s massive cyber breach of JP Morgan Chase and other financial institutions.
“Pump and dump” is a stock fraud scheme in which promotional spam emails are sent to victims encouraging them to buy “hot” stocks. Perpetrators sell their own stocks and make millions on the deal.
Two Israelis — Gery Shalon, 31, and Ziv Orenstein, 40 — were charged in connection with the scheme. Joshua Samuel Aaron, 31, a U.S. national residing in Moscow and Tel Aviv, has not yet been arrested but is accused; he remains at large, officials said.
U.S. officials have requested extradition of the two Israelis and also permission to interrogate the pair following their arrest Tuesday at home. But the Israel state prosecutor planned to request permission to extend their remand in Israel at a hearing in Jerusalem District Court today (Wednesday, July 22) in order to allow time for Israel Police to question them as well.
According to the indictment, Shalon and Orenstein were also charged with running an unlicensed BitCoin exchange, Coin.Mx.
U.S. nationals Anthony Murgio and Yuri Lebedev were taken into custody in Florida, according to U.S. District Attorney for Southern New York Diego Rodriguez. Murgio and Lebedev were charged with “knowingly [exchanging] cash for people whom they believed may be engaging in criminal activity.”
At least some of the men met more than a decade ago while attending Florida State University, Bloomberg News reported.
There was no mention in the indictment of any connection with last October’s massive cyber theft of data from JP Morgan Chase, Fidelity Investments Ltd. and E*Trade Financial Corp. Some 83 million accounts were compromised in that breach, which affected accounts in 76 million households and seven million small businesses.
However, a source close to the case told Bloomberg News the FBI believes data stolen in the JP Morgan Chase hack may have been sought for promoting stocks through a massive spam campaign in the “pump and dump” scheme.
Murgio and Lebedev were also charged with using the bitcoins to purchase ransomware – a type of malware – and of using a fictitious organization (Collectible Club) to gain “beneficial control” over a small New Jersey-based credit union. The suspects allegedly used Collectible Club to “trick the major financial institutions through which they operated into believing their unlawful BitCoin exchange business was simply a members-only association of individuals who discussed, bought, and sold collectible items such as sports memorabilia.”
According to an affidavit submitted by FBI Special Agent Joey DeCapu, “the credit union normally handled the modest banking needs of a small group of primarily low-income residents and had little or no experience with the business of ACH processing.” Red flags were raised when the National Credit Union Association noticed the bank was processing more than $30 million a month in ACH transactions through the Credit Union account. NCUA put a stop to the processing and forced the removal of the new board members.