Israeli link found in JPMorgan hacking and 'pump-and-dump' scheme arrests
At least five stocks were manipulated in 2011 and 2012, according to grand jury indictment unsealed on Tuesday in Manhattan federal court
Washington
AUTHORITIES have arrested four people in Israel and Florida and revealed a complex securities fraud scheme tied to the computer hacking of JPMorgan Chase & Co and other financial institutions.
Behind the alleged crimes described on Tuesday is a remarkable story of unpredictable alliances in modern computer crime involving, if true, a multi-layered organisation with tentacles reaching Moscow, Tel Aviv and West Palm Beach.
Officials in Israel on Tuesday picked up two men charged in the US with running a multimillion-dollar stock manipulation scheme. A third person remains at large. In another case in Florida, officials arrested two men for operating an unlicensed money-transfer business using bitcoins.
Israel's state prosecutor planned to request extending the two Israeli suspects' detention ahead of possible extradition proceedings at a hearing before the Jerusalem District Court on Wednesday, Israel police said in a text message.
Though these are separate cases, some of the individuals are linked. A principal in the alleged securities fraud scheme is a business associate of one of those charged in the Florida bitcoin operation, a friendship dating back more than a decade to their days at Florida State University.
The two are also identified in a previously unreported Federal Bureau of Investigation (FBI) memo that connects them to the investigation of the hack of JPMorgan as well as to incidents at Fidelity Investments Ltd and E*Trade Financial Corp. JPMorgan officials argued initially that one of the largest US bank hacks in history was the work of the Russian government.
None of the documents outlining the charges mention the JPMorgan hack, nor do prosecutors tie the securities fraud and money-transfer schemes to each other.
However, a person familiar with the investigation said that data stolen from JPMorgan, including tens of millions of e-mails and names of customers, may have been sought for promoting stocks through a massive spam campaign.
The alleged pump-and-dump scheme was several years old by the time of the Wall Street hacks. At least five stocks were manipulated in 2011 and 2012, according to the grand jury indictment unsealed on Tuesday in Manhattan federal court.
The stock fraud is described as a "pump-and-dump" scheme in which promotional e-mails were sent to victims, encouraging them to buy "hot" stocks, according to a parallel complaint filed by the US Securities and Exchange Commission (SEC). The perpetrators secretly sold their own holdings, it said, earning at least US$2.8 million in illegal profits.
Two Israelis and an American have been charged with the fraud. Two unidentified men from New Jersey and Florida, described as co-conspirators and not charged, picked the publicly traded companies as targets for manipulation, prosecutors said. In some cases, they sought to press private companies to go public so they could be targeted.
The men charged are Gery Shalon and Ziv Orenstein, both Israeli citizens, and Joshua Samuel Aaron, a US citizen who resides in both the US and Israel. According to the indictment, Aaron acted as the conduit between the unnamed US conspirators and Shalon, the scheme's main Israeli architect. Aaron wasn't arrested.
Israeli police said their organised crime unit 433 became involved in the case at the request of the FBI after the Israeli connection was uncovered. More than 10 US law enforcement agents have been working in Israel in recent days, police said.
Elements of the case apparently began to unravel this month. Investigators had hoped to arrest Aaron in Tel Aviv, where he lives with his wife, according to people familiar with the probe. Aaron and his wife were in St Petersburg as recently as last Sunday, based on social media posts from her account. In Russia, Aaron is outside the reach of US law enforcement authorities. BLOOMBERG
