Securities Industry Commentator by Bill Singer Esq

A digital bank that raised $110 million from investors including Leonardo DiCaprio has run into trouble (CNBC.com by Hugh Son)

Cybercriminal Charged With Unauthorized Computer Intrusion, Wire Fraud, Securities Fraud And Other Crimes / Defendant, Extradited from Ukraine, Allegedly Engaged in an Eight-Year Campaign of Cybercrime (DOJ Release)

Russian Hacker Who Used NeverQuest Malware To Steal Money From Victims' Bank Accounts Sentenced In Manhattan Federal Court To Four Years In Prison (DOJ Release)

Former Partner Of Locke Lord LLP Convicted In Manhattan Federal Court Of Conspiracy To Commit Money Laundering And Bank Fraud In Connection With Scheme To Launder $400 Million Of OneCoin Fraud Proceeds (DOJ Release)

Korean National Sentenced To 10 Years In Prison For Role In Foreign Exchange Trading Scam / More than 400 investors lost more than $60 Million (DOJ Release)

Bank Insider And Two Others Arrested In Bank Bribery And Money Laundering Conspiracy (DOJ Release)

Two Delaware County Men Charged In $21 Million Insurance Financing Fraud Scheme (DOJ Release)

SEC Obtains Final Judgment Against Former S.A.C. Capital Portfolio Manager (SEC Release)

SEC Obtains Final Judgment in Stock Manipulation Scheme (SEC Release)

FINRA Fines and Suspends Former Royal Alliance Rep Over Customer Impersonations. In the Matter of Harold A. Schwartz, Respondent (FINRA AWC)

At the same time, concern over the company's funding spiked as irate vendors called Aspiration's customer service line or appeared in person at the firm's Marina Del Rey, California, headquarters to demand payment, according to former employees. Vendors even reached out to employees on LinkedIn, asking if Aspiration was still in business. The vendor complaints became so pervasive that most of the company's acquisition team quit, the ex-staffers said.

Then, about two months ago during an all-hands company meeting, managers insisted that it was "normal" to not pay some vendors, the ex-workers said.

As charged in the criminal complaint, starting in January 2011, Parfionovas and his co-conspirators engaged in a long-running scheme to steal money through a variety of computer intrusions.

In one part of the scheme, Parfionovas and his co-conspirators allegedly obtained login information for victims' securities brokerage accounts through various methods, including stealing that information from the server of a U.S. securities order management company to which the conspirators gained unauthorized access.  The conspirators then used those accounts to steal money and conduct trades to their own benefit.  Initially, conspirators accessed the victim brokerage accounts and transferred money from those accounts to other accounts under their control.  After financial institutions began to block those unauthorized transfers, Parfionovas and his co-conspirators accessed other victim brokerage accounts without authorization, and placed unauthorized stock trades within those accounts while simultaneously trading profitably in the same stocks from accounts that they controlled.  On or about February 22, 2016, Parfionovas explained this aspect of the scheme to a co-conspirator as follows:  "I take some fraud logins.  Do some s[_]t with stock . . . sometimes 2-3 in day . . . manipulation is 100%."  In this manner, Parfionovas and his co-conspirators realized financial gains while causing losses of more than $5.5 million.

In another part of the scheme, Parfionovas and his co-conspirators allegedly obtained login information for victim email accounts and accessed those accounts without authorization.  The conspirators then sent email messages from those accounts to the victims' financial advisers and requested wire transfers from the victims' financial institutions to overseas bank accounts that the conspirators controlled.  For example, in or about May 2013, Parfionovas and his co-conspirators obtained $50,000 from an investment account that belonged to U.S. victims, and Parfionovas directed the transfer of those funds to a series of bank accounts and ultimately to an individual in Kharkov, Ukraine, where Parfionovas was located.  To defraud another victim, Parfionovas and his co-conspirators obtained control over a victim's email account and used it to send written instructions-which falsely appeared to have been signed by the victim-to transfer $225,000 from one of the victim's accounts.

NeverQuest is a type of malicious software, or malware, known as a banking Trojan.  It can be introduced to victims' computers through social media websites, phishing emails, or file transfers.  Once surreptitiously installed on a victim's computer, NeverQuest is able to identify when a victim attempted to log onto an online banking website and transfer the victim's login credentials - including his or her username and password - back to a computer server used to administer the NeverQuest malware.  Once surreptitiously installed, NeverQuest enables its administrators remotely to control a victim's computer and log into the victim's online banking or other financial accounts, transfer money to other accounts, change login credentials, write online checks, and purchase goods from online vendors.

Between June 2012 and January 2015, LISOV was responsible for key aspects of the creation and administration of a network of victim computers known as a "botnet" that was infected with NeverQuest.  Among other things, LISOV maintained infrastructure for this criminal enterprise, including by renting and paying for computer servers used to manage the botnet that had been compromised by NeverQuest.  Those computer servers contained lists with approximately 1.7 million stolen login credentials - including usernames, passwords, and security questions and answers - for victims' accounts on banking and other financial websites.  LISOV had administrative-level access to those computer servers.

LISOV also personally harvested login information from unwitting victims of NeverQuest malware, including usernames, passwords, and security questions and answers.  In addition, LISOV discussed trafficking in stolen login information and personally identifying information of victims.

"OneCoin" is a massive pyramid fraud scheme.  OneCoin Ltd. was co-founded in or about 2014 by Ruja Ignatova, and is based in Sofia, Bulgaria.  SCOTT was introduced to Ignatova in late 2015, and began laundering OneCoin fraud proceeds in 2016.  Ignatova served as OneCoin's top leader until her disappearance from public view, in or about October 2017.

OneCoin Ltd. operates as a multi-level marketing network through which members receive commissions for recruiting others to purchase cryptocurrency packages.  OneCoin Ltd. has claimed to have over three million members worldwide, including victims living in the Southern District of New York.  Records obtained in the course of the investigation show that, between the fourth quarter of 2014 and the third quarter of 2016 alone, OneCoin Ltd. generated €3.353 billion in sales revenue and earned "profits" of €2.232 billion.  OneCoin continues to operate to this day.

Among a number of other representations, OneCoin Ltd. has claimed that the OneCoin cryptocurrency is "mined" using mining servers maintained and operated by the company, and that the value of OneCoin is based on market supply and demand.  The purported value of a OneCoin steadily grew from €0.50 to approximately €29.95 per coin, as of in or about January 2019.  In fact, the value of OneCoin is determined internally and not based on market supply and demand, and OneCoins are not mined using computer resources.  Moreover, the investigation has revealed that Ignatova and her co-founder conceived of and built the OneCoin business fully intending to use it to defraud investors.

SCOTT - who was employed between June 2015 and September 2016 as an equity partner at Locke Lord LLP, a prominent international law firm - was first introduced to Ignatova in September 2015.  Beginning in 2016, SCOTT formed a series of fake private equity investment funds in the British Virgin Islands known as the "Fenero Funds."  SCOTT then disguised incoming transfers of approximately $400 million into the Fenero Funds as investments from "wealthy European families," when in fact the money represented proceeds of the OneCoin fraud scheme.  SCOTT layered the money through various Fenero Fund bank accounts in the Cayman Islands and the Republic of Ireland.  SCOTT subsequently transferred the funds back to Ignatova and other OneCoin associated entities, this time disguising the transfers as outbound investments from the Fenero Funds.  As part of the scheme, SCOTT and his co-conspirators lied to banks and other financial institutions all over the world, including to banks in the United States, to cause those institutions to make transfers of OneCoin proceeds and evade anti-money laundering procedures.

SCOTT, who boasted about earning "50 by 50," was paid more than $50 million for his money laundering services.  He used that money to purchase, among other things, a collection of luxury watches worth hundreds of thousands of dollars, a Ferrari and several Porsches, a 57-foot Sunseeker yacht, and three multimillion-dollar seaside homes in Cape Cod, Massachusetts.

On September 3, 2019, Chung, 56, of Seoul, Korea, pleaded guilty to laundering money he obtained from a foreign exchange trading scam.  According to his guilty plea, Chung acknowledged more than 400 victims lost approximately $60,302,886.59 as a result of the scam.  Chung admitted that, in 2003, he and codefendant Peter Son, 47, of Portland, Oregon, started two companies, SNC Asset Management, Inc., and SNC Investments, Inc., both headquartered in Pleasanton, California.  Chung admitted that he falsely advertised both companies as highly successful in foreign exchange trading.  Further, Chung promised potential investors they would receive annual investment returns of between 24% and 36%.  Chung knew that these representations were false and made with the intention of attracting individuals to invest in the two companies.  Chung acknowledged that hundreds of investors opened accounts and deposited money into the two companies based upon the fraudulent representations.  Chung and Son deposited the clients' funds into bank accounts they controlled.  While directing employees of the companies to send monthly statements to the investors that falsely reported accrued earnings, Chung regularly cashed checks or arranged wire transfers in amounts over $10,000 for his own benefit.  By October 2008, the defendants depleted the funds in the companies' accounts and closed both businesses without advance notice to employees or clients.

Between at least June 2019 and September 2019, PHILLIPS, who is employed at an Atlanta-area branch of a national bank ("Bank-1"), opened bank accounts in the names of shell companies and fictitious persons in exchange for a percentage of the fraud proceeds laundered through the accounts.  ODIBOH controlled one PHILLIPS-created account, and he and COLLIER agreed to launder $15,500 through it, hoping that this transaction that would be the first in a series laundering up to $2 million that they believed was stolen from a company by its employees.  When the first payment arrived, they paid their bribe to PHILLIPS, divided a share for themselves, and returned half to the senders.  In fact, the FBI sent the payment as part of a sting operation. 

[R]odriguez, a licensed insurance broker, and Hogg, a businessman, conducted a scheme involving the issuance of fraudulent insurance premium finance loans, which were originated by an insurance premium finance company and funded by banks.  They conducted this scheme with the assistance of a third person who was an employee of the insurance premium finance company.  Between at least November 2016 and January 2018, the employee approved approximately 37 premium finance loans, or loan supplements, originated by insurance agencies controlled by Rodriguez, purportedly to purchase policies to insure entities owned or controlled by Hogg and/or Rodriguez, or in a few instances controlled by other individuals.  These loans were purportedly for the purpose of financing insurance premiums.  However, as Hogg, Rodriguez, and the employee knew, there were no underlying insurance policies, and Hogg and Rodriguez used the proceeds for other purposes.  The loans totaled approximately $21,357,645.

Instead of paying insurance premiums (because there were no actual insurance policies), Rodriguez kept some of the proceeds for himself and distributed most of the other proceeds to bank accounts controlled by Hogg, or in a few instances to other individuals/entities.  Rodriguez and Hogg used some of the proceeds from newer loans to make loan payments to the premium finance company or to the banks on older loans.  Had loan payments not been made on at least some loans, the premium finance company and the banks likely would have become suspicious.  Additionally, between approximately October 2016 and December 2017, Hogg made approximately 40 kickback payments, totaling $873,118, to the finance company employee who had approved the fraudulent loans.  The employee has admitted to law enforcement that these payments were made to him because he approved the bogus loans.

In July 2018, Schwartz received permission from a customer to reduce the periodic withdrawals from an annuity the customer had purchased previously. Thereafter, Schwartz impersonated the customer during two telephone calls with the customer service hotline of the annuity company and was successful in obtaining a reduction of the periodic withdrawals from the customer's annuity. Although the customer gave Schwartz permission to effect the reduction of withdrawals, he did not give Schwartz permission to impersonate him with the annuity company. 

• Securities Industry Commentator
• Bill Singer