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Illicit use of victims' brokerage accounts

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The evidence against Grand Logistics appears to mainly be the overwhelming circumstances of each of its trades. The company repeatedly profited from the unauthorized activities of an intruder on each of the compromised systems, according to the SEC filing.

"There is no innocent explanation for the pattern and timing of Gashichev's trading, and the way in which they match up to trades in the intruded accounts," stated the filing. "His trades on 25 occasions always win."

While the SEC has frozen the suspected thief's accounts and demanded the repatriation of funds transfered to the account, they will have more trouble tracking down the actual intruder, the SEC's Greer said.

"It is very difficult to identify and locate the perpetrators of these frauds," she said. "They mask their identities through the only means by which we can track them - their Internet addresses that they use to hack into these accounts."

While the Internet addresses used by the Grand Logistics account to execute trades traced back to Moscow and St. Petersburg, Russia, as well as Amsterdam, Netherlands, they differed from the Internet addresses used by the intruder who compromised the victims' brokerage accounts. The addresses also differed from those used by the legitimate account holders, according to the SEC's court filings.

The difficulty in tracking down the criminals makes prosecution an unlikely option, leaving civil remedies - such as the account freeze - as the best way to punish the fraudster, according to one legal expert.

"Sometimes pursing civil remedies against foreign nationals is actually easier," said James Aquilina, managing director of Stroz Friedberg LLC and a former federal prosecutor. "They don't have the same burden of proof as criminal prosecutions."

Yet, the SEC's Greer is not ready to give up.

"Law enforcement often benefits from the mistakes of those who commit crimes and commit fraud," she said. "They aren't the most careful people in the world, and often their carelessness ends in bringing them to justice."

This article originally appeared in Security Focus.

Copyright © 2006, SecurityFocus

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