The defendants took a “classic stock fraud scheme” and brought it into the cyberspace, Bharara said in a Tuesday press conference.
He said they stole personal information for tens of millions of customers, targeting people engaged in signficant stock trading.
They then used that private information to blast emails and tout penny stocks, Bharara said.
Here’s an official statement from Bharara’s office:
Since 2011, SHALON, AARON, ORENSTEIN, and their co-conspirators orchestrated multimillion-dollar stock manipulation – or “pump and dump” – schemes to manipulate the price and trading volume of dozens of publicly traded microcap stocks (“penny stocks”) in order to enable members of the conspiracy to sell their holdings in those stocks at artificially inflated prices. In some instances, SHALON and AARON caused the companies to become publicly traded in furtherance of the scheme. To do so, SHALON caused privately held companies to engage in “reverse mergers” with publicly traded shell corporations SHALON controlled. ORENSTEIN managed bank and brokerage accounts used in furtherance of the schemes under aliases that ORENSTEIN supported with false passports and other false personal identification information.
To artificially manipulate the trading volume and prices of dozens of stocks, among other things, at pre-arranged times, SHALON and AARON disseminated materially misleading, unsolicited messages by various means – including by email (“spam”) to up to millions of recipients per day – that falsely touted the stock in order to trick others into buying it. SHALON and AARON engaged in the U.S. Financial Sector Hacks in part to acquire email and mailing addresses, phone numbers, and other contact information for potential victims to whom they could send such deceptive communications. SHALON and his co-conspirators generated tens of millions of dollars in unlawful proceeds from the securities market manipulation schemes.
The three defendents were charged in a 23-count indictment related to the computer hacking of 12 financial institutions and financial news publishers.
They are accused of stealing the personal information of over 100 million customers, according to the indictment.
In addition to the market manipulation scheme, Bharara accused Shalon and Orenstein of operating unlawful internet casinos and engaging in “massive hacks and cyberattacks against other internet gambling businesses to steal customer information, secretly review executives’ emails, and cripple rival businesses.”
Separately, Bharara accused the same two men of operating illicit payment processing schemes for criminals. Users included “unlawful pharmaceutical distributors, purveyors of counterfeit and malicious purported ‘anti-virus’ computer software, their own unlawful internet casinos,” and an illegal United States-based Bitcoin exchange owned by Shalon.
Another charge is related anti-money laundering laws that Shalon’s Bitcoin exchange violated.
At the time, the bank said, it hadn’t seen “any unusual customer fraud related to this incident.” It has since invested heavily in security and built a digital security team with ex-military cybersecurity experts.
Last month, Dow Jones, which publishes The Wall Street Journal and Barron’s, said that hackers had intruded their networks, seeking contact and payment information for 3,500 customers.