E*Trade, TD Ameritrade Targeted in Brokerage Fraud
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E*Trade Financial Corp. and TD Ameritrade Holding Corp. customer accounts have been infiltrated by computer hackers in Eastern Europe and Asia in one of the biggest cases of identity theft to strike the American securities industry.
The Federal Bureau of Investigation, the Securities and Exchange Commission and the NASD are trying to unravel the fraud at the online brokers, which has cost New York-based E*Trade at least $18 million and caused losses at TD Ameritrade of Omaha, Nebraska, company officials said. In one “pump-and-dump” scheme the SEC uncovered, thieves used customers’ money to drive up the prices of little-traded stocks and then sold shares they bought earlier at a profit.
“The perpetrators were more organized, and it was a bigger issue this quarter than it had ever been before,” E*Trade Chief Operating Officer Jarrett Lilien said in an interview. “It wasn’t just hitting one company, it was hitting everybody.”
The case shows how criminals who ply the Internet from countries beyond the reach of American law enforcers are turning to financial markets to commit fraud. Online brokers are a growing target for identity theft, a crime that in all its forms will cost Americans $56.6 billion this year, according to Javelin Strategy & Research of Pleasanton, California, which has prepared similar estimates for the Federal Trade Commission.
“Identity thieves appear to be directing increased attention to the securities business, and their attacks are growing in sophistication,” the chief counsel in the SEC’s office of compliance inspections and examinations, John Walsh, said at an industry conference in Phoenix on October 5.