Elaborate Russian Pump and Dump Run Thru IB

Discussion in 'Retail Brokers' started by HoundDogOne, Apr 7, 2007.

  1. Not saying IB is at fault in any way...
    Or worse than any other Online Broker...
    But this item should be educational to most...
    And exposes the insurmountable security issues facing Online Brokers and their Customers.

    Many of these security issues did not exist 10 years ago...
    And are, in fact, the direct result of Online Broker policies...
    Like not "knowing your Customer"...
    Because email and online forms are cheaper...
    Than actual human contact.

    www.sec.gov/litigation/complaints/2006/comp19949.pdf
     
  2. Please add the following to your summary. He purchased HIS shares Via his account with LHV (White-Labeled IB Account) and then proceeded to pump the price via Stolen TD Ameritrade User names and Passwords...(for CESI)

    In the specifically mentioned scheme.


    What this shows is a particularly nasty vulnerability at TD Ameritrade, But it doesn't particularly show a Vulnerability with IB...

    I'd hafta fly to russia and put this guy down if he did this to me. Forget the SEC.
     
  3. GTC

    GTC

    Apart from IB, a few other brokerage firms were mentioned in that detailed complaint:
    "Almost immediately after his Grand Logistic purchases, Gashichev, using electronically stolen usernames and passwords, then intruded into one or more innocent third party accounts at E*Trade Securities LLC, TD Ameritrade, Inc., Scottrade, or other online broker-dealers, and without the knowledge, authorization or consent of the unwitting accountholder, liquidated existing positions to generate purchasing power."

    This one is from a different episode.
    "Karmadin and his gang did the same thing 13 other times. According to the SEC at least 27 accounts and 14 companies at brokers E-Trade Securities, Scottrade, TD Ameritrade, J.P. Morgan Chase and Charles Schwab were involved."

    Looks like hackers do not care much about hacking into small brokerage firms' accounts. Ameritrade, Schwab and E-trade now offer covering 100% of any losses in any of your accounts due to unauthorized activity.
     
  4. >>>>>>>>>>>>>>>

    As part of its online brokerage services, LHV maintains an omnibus brokerage account with numerous underlying sub-accounts in its name at Interactive Brokers, LLC, a United States online broker-dealer registered with the Commission. The Grand Logistic account is one of over 200 sub-accounts held in the name of LHV at Interactive Brokers. The sub-accounts enable LHV and its customers to trade securities in the U.S. markets.

    LHV provides its customers with usernames and passwords to access the respective sub-accounts they have been assigned, through a trading platform on LHV’s website, which links directly to the Interactive Brokers online trading system. However, the only name visible on the account is LHV. Interactive Brokers does not know the identities of the LHV customers that use the sub-accounts or the beneficial owners of those sub-accounts.

    >>>>>>>>>>>>>>>>>

    This is a standard "Correspondent Clearing" relationship that one might see with a US broker-dealer...
    A US broker-dealer that is heavily regulated.

    What surprises me as an East European...
    Is that this actually happened.

    Russia/Ukraine have no functioning legal system as we understand in the West...
    And is corrupt to the point where only money talks...
    And certainly no functioning regulatory system.

    On top of this is a "culture of exploitation" as opposed to a "culture of hard work"...
    Where millions of very smart guys are dreaming up ways to exploit others...
    Partly because building a legit business is almost impossible.

    Calling yourself a Russian "investment bank" somehow legitimizes you?

    Any firm like LHV...
    Would always be, at the very least, paying protection to the local mafia to exist...
    And, at worst, be controlled by the local mafia...
    And a front for money-laundering and a lot of other illegal activity.

    LHV got shut down...
    But the Pump and Dumpers got away.
    Actually, I guarantee you everyone in Russia got off by paying the right people.
    They are Russian Heroes for ripping off the Stupid Foreigners.

    For me this is fascinating...
    Because for maybe $50,000 to $100,000 I could buy a small RU or UA "investment bank"...
    Clear through IB...
    And pretty much avoid all the restrictions that apply to US broker-dealers.

    And the money would be safe with IB in America.
     
  5. ssss

    ssss

    They are Russian Heroes for ripping off the Stupid Foreigners.


    Genlemen

    As native russian author can say ,that is not Heroes ...

    All Accounts with high profitability closely monitored from SEC
    All electronic connection's recorded .

    In Russia equal situation . In Contry ,which USA not
    liked -Belaruss ,control is more tight .

    As process of money transfer related to multiple persons
    (Ameritrade as example long time demanded fax from Bank with signature for transfer of moeny from USA to Germany,Swiss
    &) this method have low chance .


    If Great group of potencial deliquent's would perform multiple attempt's ,0.1% would successfull another 99.9% would catched .(approx)

    But that is essentialy equal success relation to another
    activities as drugs & (alsov for native USA persons)



    Your respectfully
     
  6. ssss

    ssss

    Because for maybe $50,000 to $100,000 I could buy a small RU or UA "investment bank"...
    Clear through IB...
    And pretty much avoid all the restrictions that apply to US broker-dealers.
    --------------------------
    You must not have any romatic illussion .

    All what you stated ,in casse of success based on social relation (essentialy as Goldman Sachs profit)

    If you not belong to specific social group ,you can not buy this socialisation for money.

    And that is equal in Russia ,USA ,Germany ,France .
    (Remmember from whic hof Family is President Bush)

    Socialisation is result of long term activities as
    1. You studies together with VIP XXX
    2. You marriedd with daughter of VIP YYY
    3. You work 10 years with BBB

    &

    More of them alsov by criminal organisation
    as Cosa Nostra ,you would not receive any position
    without socialisation


    Your respectfully
     

  7. I do not have any "romantic illusions".

    I have lived in Kiev for long periods...
    Speak the language better than most of the natives...
    Have a large family there and many friends...
    Including a cousin that runs a business with about 500 employees.

    Any money I ** might theoretically ** invest in UA...
    Would be a small amount I could just completely walk away from and write-off...
    It would all be more for the adventure.

    This post is a good example...
    Of how Russians believe that all "foreigners" are idiots...
    Because every one they have ever heard about has been ripped off by the natives.

    Respectfully...
     
  8. Here's another scam run through IB in 2006.

    Note this section:

    35. Interactive Brokers' sole communication with the Defendants has been through emails.

    There guys faked a "water bill" to "prove" a London address...
    When, in fact, they were based in Guernsey and Cyprus.
    A smart 10 year old can fake a water bill.

    http://www.sec.gov/litigation/complaints/2007/comp20018.pdf
     
  9. Perhaps this is why I had to present SOOOO much documentation to IB when I opened my account....

    It also shows the benefits of organizing as a corporate entity to trade :)

    Unfortunately the illegal will always use the loopholes as they find them.

    Note line 29. This fraud was discovered when they attempted to VERIFY his mailing address by ending a tangible item to that address..

    If anything, this is the best you can do aside from verifying all documentation with the various agencies. (ex. calling Thames water to confirm the account.)

    However the key piece of info is in section 113. They Appear..... This indicates a lack of proof, but what raises the red flags is the falsified address and other information.

    The best part is that this was observed and caught by IB and possibly referred to the SEC, which suggests that IB pro-actively monitors against fraud.
     
  10. Most documentation can be faked...
    As can email and IP addresses, etc.

    I could have opened my IB account without actually speaking to a human being.

    But this thread is about the sh*t that goes down offshore...
    In places like Eastern Europe that have no connection to your BANAL American experience.
     
    #10     Apr 7, 2007