Pump-and-dump schemes in the stock market are an old way of making money from gullible investors, but they require persuading the investor to buy an overpriced stock.
A Russian trader, operating through an Estonian brokerage firm, found a simpler way to pump and dump stocks, the Securities and Exchange Commission said yesterday.
The S.E.C. said that the trader, Evgeny Gashichev, who was trading though an account of Grand Logistic, a Belize corporation based in Estonia, used the Internet to steal passwords of account holders at online brokerage firms, among them E*Trade Securities, TD Ameritrade and Scottrade.
The conspirators, law enforcement officials say, used the streets of Queens as their own personal bumper-car course.
An unsuspecting driver would be backing out of a driveway or a parking space and — boom! — a car loaded with people would crash into his car. Those people, officials say, would all get treatment at the same Upper Manhattan clinic, often for pains and strains that do not leave telltale marks.
The clinic would then seek reimbursement from car insurance companies, which, under New York’s no-fault insurance law, pay up to $50,000, no matter who caused the crash.
The crashes — 40 of them over three years — were deliberately staged by an insurance-fraud ring that hired drivers to cruise the neighborhood looking for targets and bilked insurers out of $1.6 million, the Queens district attorney, Richard A. Brown, said on Thursday.
Sixty-one people were charged this week: the operators of the clinic, Bronx Park Medical at 100 Dyckman Street, along with the drivers, passengers and the people who recruited and coached them. Seven people are still being sought.
The conspirators drove to Queens specifically to target drivers with Asian backgrounds in Flushing, home to many immigrants from China and other Asian countries, Mr. Brown said, because they believed that “they were bad drivers and would be blamed for the crash,” and that a language barrier would keep them from expressing suspicions to the police.
It worked for a while, said Gerard A. Brave, chief of the district attorney’s rackets bureau. Several of the victims, initially alarmed when approached by law enforcement officials, said they had thought something was fishy all along, but others, he said, insisted, “No, it was probably my fault.”
None of the unsuspecting victims were seriously injured.
A tip in March 2007 from an insurance company started the investigation, Operation Direct Hit, which ultimately involved the district attorney’s office, the F.B.I., the Police Department’s organized crime division, a state insurance-fraud task force and insurance firms.
Law enforcement officials wiretapped and videotaped the clinic offices, followed the cars, and in two cases, detectives believe, scared off drivers before they hit anyone by stopping them for traffic violations and taking down all the passengers’ names.
The ring involved people from across the city and region, according to investigators. Twelve face charges including enterprise corruption, with a maximum penalty of 25 years in prison; the rest face lesser charges related to insurance fraud.
Officials said three people — Inessa Drabkin, 53, of Manhattan; Michael Mazur, 42, of Staten Island; and Yevgeniy Ryvkin, 38, of Brooklyn — organized the scheme with the help of Tomas Aquiles, 40, of New Britain, Conn., who recruited people to drive and ride in the cars from Upper Manhattan and the Bronx.
Mr. Mazur and Ms. Drabkin ran the clinic, officials said, and laundered the money through companies they owned, Integra CBA Company and PKH Corporation. Mr. Ryvkin coordinated lawsuits filed to claim the money, officials said. The three pleaded not guilty to charges including enterprise corruption.
Mr. Aquiles enlisted seven people who helped him recruit drivers and passengers, mostly women ranging from their teens to their 50s who were paid about $1,000 each, officials said.
He was recorded on video and wiretaps coaching the patients in how to feign or exaggerate their injuries, officials said, and is being charged with hate crimes for selecting Asians as victims, which could enhance his sentence if he is convicted.
Mr. Aquiles drove behind the cars, coaching the drivers by cellphone on which cars to hit, and sometimes threatened people who wanted to pull out of the scheme, said Detective Gerard Shanley, who helped conduct the surveillance.
Lawyers for Mr. Mazur and Ms. Drabkin would not comment on the case. Mr. Ryvkin’s lawyer, Arkady Bukh, said that he had known him for years and that “as far as I know he is a legitimate businessman and he has never been involved in any wrongdoing.”
Perhaps the most famous con artist of the Soviet era was a fast-talking, eye-winking, nimble-fingered, double-dealing journeyman named Ostap Bender. He was fictional, the antihero of a satirical novel about a quest for lost jewels called “The 12 Chairs,” but his casual disdain for the law reflected a widely held cynicism here.
“This misdeed, though it does come under the penal code, is as innocent as a children’s game,” Bender says of a scheme to use a purloined document to steal another man’s identity.
Were Bender to ply his trade these days, he would undoubtedly be sitting in front of a computer, spewing out e-mails that slyly ask for credit card information or hawk sexual aids and other flimflam. Russia has become a leading source of Internet ills, home to legions of high-tech rogues who operate with seeming impunity from the anonymous living rooms of Novosibirsk or the shadowy cybercafes of St. Petersburg.
The hackers go by names like ZOMBiE and the Hell Knights Crew, and they inhabit such a robust netherworld that Internet-security firms in places like Silicon Valley have had to acquire an expertise in Russian hacking culture half a world away. The security firms have not received much assistance from the Russian government, which seems to show little interest in a crackdown, as if officials privately take some pleasure in knowing that their compatriots are tormenting millions of people in the West.
In fact, Russian hackers became something akin to national heroes last spring when a wave of Internet attacks was launched from Russia against Web sites in Estonia, the former Soviet republic. The incidents began after the Estonians angered the Kremlin by moving a Soviet-era war monument.
The motive for most wrongdoing, though, tends to be greed. In 2005, Russians broke into the State of Rhode Island Web site and then brazenly proclaimed that they had swiped credit card information from 53,000 transactions. Officials acknowledged the theft, though they said the scope was smaller.
The perpetrators in these affairs are rarely if ever caught, but it is not hard to deduce their backgrounds. Russia has long had a strong system of math and science education, and until the relatively recent upturn in the economy, the multitudes of whiz kids who graduated from its schools often had poor job prospects.
At the same time, they were entering a society that for decades had built up a deep skepticism about the virtues of following the rules. Under Communism, the thicket of strictures that governed almost every aspect of life was considered so inane that only fools were thought to abide by them.
He was a young man with a big plan: taking aim at rich Americans, with the help of the Forbes 400 list, and robbing their financial accounts by trolling the Internet for information all the way from his base in Moscow, prosecutors in Manhattan said yesterday.
The man, Igor Klopov, 24, hired confederates in the United States to help with the execution of his plan, prosecutors said.
Those confederates, whom he found by posting job advertisements through Web sites like Monster.com, were promised cash, stays at five-star hotels and travel in limousines, prosecutors said.
Mr. Klopov and his accomplices almost succeeded, law enforcement officials said, having stolen $1.5 million from four victims before his lust for wealth and an attempt to steal $10.7 million more led him to two truly big fish, who proved his undoing.
The big fish were Anthony Pritzker, president of Trans Union Credit and a member of the Chicago family that founded Hyatt hotels, and Charles Wyly Jr., a Texas entrepreneur who, with his brother, Sam, is a Republican Party benefactor with close ties to President Bush. Mr. Pritzker is ranked No. 160 on the 2006 Forbes list of the richest Americans, with an estimated net worth of $2 billion.
Mr. Pritzker and Mr. Wyly, however, did not get scammed. They were, according to James Kindler, chief assistant for the Manhattan district attorney, Robert M. Morgenthau, saved by what Mr. Kindler called “alert bankers.”
Unbeknown to Mr. Klopov, his plan began to unravel as early as last November, according to officials.
At that time, one of Mr. Klopov’s accomplices used fake documents in the name of Mr. Pritzker and tried to withdraw money from a Manhattan branch of Chase Bank, but was unsuccessful when bankers contacted law enforcement officials, who were already investigating the ring.
Around the same time, Mr. Klopov, pretending to be Mr. Wyly, contacted Chase Bank and ordered a checkbook sent to a new address in Texas, which was connected to an accomplice, officials said. The accomplice then sent a check for $7 million from Mr. Wyly’s account to a gold dealer in Westchester for the purchase of gold bars. The gold dealer contacted the bank to verify the check’s authenticity. The bank contacted Mr. Wyly, who said he had never signed such a check.
The district attorney’s office in Manhattan joined federal Secret Service agents in hatching a plan to bring Mr. Klopov to the United States by arranging for an undercover agent who had infiltrated Mr. Klopov’s ring to deliver the gold bars to him. Mr. Klopov met undercover agents from the New York police and the Secret Service in the Dominican Republic and traveled with them by private plane to New York.
So instead of buying gold, Mr. Klopov was arrested on May 15 while touring the sights, as undercover agents photographed him near the River Café in Brooklyn against the backdrop of the Brooklyn Bridge and New York’s financial district, prosecutors said. He has pleaded not guilty to multiple counts of conspiracy, grand larceny, attempted grand larceny, money laundering, identity theft, forgery and other crimes, and is being held without bail at Rikers Island.
His lawyer, Arkady Bukh, said yesterday in a telephone interview that Mr. Klopov — who has four co-defendants who were arrested yesterday in Texas, Florida, Kentucky and Michigan — was interested in cooperating with prosecutors. “Our position is to assist the government and we are hoping to get a positive plea deal from the prosecutor,” Mr. Bukh said. The district attorney in New York will seek extradition of the four co-defendants.
Mr. Bukh said Mr. Klopov was a graduate of Moscow University who had never been to the United States before, and whose girlfriend and family back in Moscow were very worried about him. He also complained that Mr. Klopov had been “entrapped” into entering the United States by the Secret Service, which he said had — unbeknown to his client — chartered the plane from the Dominican Republic.
Barbara Thompson, a spokeswoman for the district attorney, declined to comment on whether the Secret Service had chartered the plane, but said, “He was in very good spirits when he was having his picture taken in front of the World Financial Center. This was not a man who was kidnapped, this was a man who willingly came to us to get his $7 million in gold.”
He was charged with stealing $1.5 million and trying to steal an additional $10.7 million. The indictment names more than a dozen victims, though some were the victims not of financial theft but of identity theft. Mr. Klopov is accused of using stolen identities to carry out the larger financial scheme.
Prosecutors said yesterday that Mr. Klopov was self-taught in the art of Internet identity theft and had used a combination of Internet smarts and old-fashioned techniques like forging driver’s licenses, powers of attorney and funds transfer request forms, hiring private investigators and using accomplices to assume the identities of victims.
Three more people were indicted in Federal District Court yesterday in a scheme, carried out by at least 26 people, that involved submitting fraudulent mortgage loan applications and inflating home appraisals to get millions of dollars in loans from lending institutions. The indicted people, Galina Zhigun, Garri Zhigun and Maryann Furman, were added to 23 others announced by prosecutors in January, including mortgage brokers, real estate appraisers, straw buyers and a settlement agent, prosecutors said. Ms. Zhigun was the owner of a Brooklyn mortgage brokerage firm called A.G.A. Capital that employed many of the brokers charged in the scheme. Since 2004, A.G.A. Capital, its successor, Lending Universe, and a related company, Northside Capital, brokered more than a thousand home mortgages and home equity loans, the authorities said. In some cases, prosecutors charged, employees of the company recruited straw buyers and then helped them obtain subprime loans, which are easier for borrowers with poor credit to get. To ensure that the straw buyers got the loans, bank statements and other proof of income were falsified in some cases, prosecutors said. In other cases, the brokers stole identities to obtain loans, prosecutors said.