The United States Securities and Exchange Commission today filed a complaint in the United States District Court for the District of Nebraska charging three Indian nationals with participating in a fraudulent scheme to manipulate the prices of at least fourteen securities through the unauthorized use of other people's online brokerage accounts.
The Commission's complaint alleges that, between July and November 2006, Jaisankar Marimuthu, Chockalingam Ramanathan and Thirugnanam Ramanathan 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 thirteen issuers and options on shares of another issuer. Then, without the account holders' 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. These transactions created the appearance of legitimate trading activity and pumped up the share price of the fourteen securities. 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 account holders' own bank accounts.
In total, the Defendants realized unlawful trading profits of at least $121,500. Online broker-dealers whose customers' accounts were compromised suffered losses of least of $875,000 as a result of the Defendants' fraudulent conduct. The Commission's action charges the Defendants with violations of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and seeks permanent injunctive relief, disgorgement and civil money penalties.
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. The government will seek the extradition of the arrested Defendants to face charges in Nebraska.
The Commission's Office of Investor Education and Assistance has previously issued an investor alert, available on the Commission's website, which provides tips to avoid becoming a victim of online intrusions. See http://www.sec.gov/investor/pubs/onlinebrokerage.htm.
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.
