FBI: Fraudsters Scamming Online Brokerage Accounts

The FBI is warning that tens of millions of dollars have been robbed from online brokerage accounts by scammers who target hotel guests and Internet café patrons, according to Bloomberg. E*Trade Financial Corp. paid $18 million in last year’s third quarter to reimburse customers whose accounts were scammed. TD Ameritrade Holding Corp. paid $4 million. In March, the Justice Department opened its first criminal charges in such cases. Since December, the Securities and Exchange Commission has brought five civil complaints against such scammers. Several more cases are in the pipeline, said an SEC official. In the recent wave of fraud scams, brokerages have reimbursed their customers for their losses, although not all brokerages have policies requiring that they do so. The latest fraud combines identify theft with a pump-and-dump scheme. In the first part of the machination, the scammers install keystroke-logging programs on computers in hotel business centers and Internet cafes to steal investors’ usernames and passwords. They then deplete the investors’ accounts and use the money for the second part of their scheme, in which they buy up shares of thinly traded stocks that they already own, boosting the price and then selling out of it. The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.