Hack, pump and dump

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: “Fraud and falsehood only dread examination. Truth invites it,” said the late 18th century poet Samuel Johnson. Yet, to date, most frauds seem to be out of the scanner, and remain undetected. And, this is not referring to back alley crimes and muggers, but modern thefts that occur under our very noses. Small and ingenious techniques are now being used by scamsters to avoid being noticed and rid you of your wealth. Some of these new age scamsters lurk behind the murky shadows of the cyber world and some use age-old greed baits to lure investors to make a fast buck.

While one may always feel that Indian systems are relatively slack and backward, it took Thirugnanam Ramanathan, a 35 year old originally from Chennai, barely any effort to pull off a high-tech stock fraud scheme that involved hacking into US brokerage accounts to make unauthorised purchases of thinly traded stocks to drive up the price.

Once the prices began to rise, he and his colleagues then dumped their own shares in the same stocks for a profit. At least 60 customers of nine brokerage firms were victims to this scam before Ramanathan was cuffed in Honk Kong and extradited to the US. He slipped up once when one of the instances of stock manipulation was traced to an IP address used by a Bangkok hotel where he was staying at that time. Welcome to the new scam, hack pump and dump.

Such hack, pump and dump scheme hit 60 online stock traders and nine brokerage firms, including TD Ameritrade, ETrade Financial, Firstrade Securities, ChoiceTrade, OptionsXpress, TradeKing and Terra Nova Financial. It was also the first time that such a case was tried, and the guilty, namely Thirugnanam Ramanathan and his accomplices were sentenced to two years in prison. However, by then the damage had already been done, with over $300,000 lost.