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SEC Exposes Online Fraudster

Estonian disguises his identity, uses stolen electronic IDs in classic 'pump and dump' scheme

An online fraudster who manipulated the stocks of at least 21 companies and stole more than $350,000 from investors is now on the lam, according to law enforcement officials.

The Securities and Exchange Commission Friday issued a complaint against Grand Logistic, S.A., and its sole owner and operator, Evgeny Gashichev. The SEC accused Gashichev of committing a series of online crimes between Aug. 28 and Oct. 13, 2006, to influence stock prices and take over the accounts of online investors.

The SEC has closed down Grand Logistic, but Gashichev's whereabouts are unknown, according to the complaint. "Although Gashichev's trading through the Grand Logistic account has been stopped, it is highly likely that the fraud continues," the agency warns.

In a traditional "pump and dump" scheme, a fraudster buys many shares of a low-priced stock and then attempts to influence other investors to invest in the stock through false or misleading information. When the stock price goes up, the fraudster quickly sells his shares, reaping a profit and disappearing while the other investors helplessly watch the stock's price plummet.

Gashichev added an online twist to this classic scam. He stole the identities of some 25 individual investors, according to the complaint, and he then used all the money in their accounts to buy up as many shares of a targeted stock as possible. These online thefts and purchases helped to raise the price of a stock owned by Gashichev, which he then sold, pocketing the profit and leaving the account holder with hundreds -- sometimes thousands -- of shares of near-worthless stock.

With an initial investment of $30,000 placed into the Grand Logistic account, Gashichev made approximately $353,000 in about six weeks, according to the complaint.

Forensic experts have thus far been able to track down Gashichev, who used several different IP addresses -- or sometimes, the IP addresses of his account holder victims -- to mask his identity and location for the online transactions.

The SEC is working with law enforcement authorities to find Gashichev, who is believed to be hiding somewhere in the St. Petersburg area. The agency warns investors not to provide sensitive information via email or to accept offers of free software or games, which may lead to the theft of account information.

— Tim Wilson, Site Editor, Dark Reading

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