One of the three men charged in 2007 with masterminding an international "hack, pump and dump" scheme to hijack brokerage accounts was sentenced Sept. 8 to two years in prison. Thirugnanam Ramanathan, 35, a native of Chennai, India, and a legal resident of Malaysia, was also ordered to pay a fine of $362,247 and serve three years of supervised release.
Ramanathan admitted in his guilty plea that from February through December 2006 he participated in hacking into brokerage accounts and, once in, illegally used the accounts to make large unauthorized purchases of securities in the name of the unsuspecting customers. After driving up the price of thinly traded stocks through the bogus stock transactions, Ramanathan and two co-conspirators then dumped their own shares of the same stock for a profit.
According to the Department of Justice, at least 60 customers and nine brokerage firms have been identified as victims with losses of approximately $300,000. Online brokerage firms affected included TD Ameritrade, ETrade Financial, Firstrade Securities, ChoiceTrade, OptionsXpress, TradeKing and Terra Nova Financial.
Ramanathan pleaded guilty on June 2 to one count of conspiracy to commit wire fraud, securities fraud, computer fraud and aggravated identity theft before Judge Smith Camp in Omaha, Neb. Following his arrest in Hong Kong, Ramanathan was extradited on May 25, 2007, to the United States.
Jaisankar Marimuthu, 33, and Chockalingham Ramanathan, 34, also residents of Chennai, were indicted along with Ramanathan in January 2007. Marimuthu and Chockalingam Ramanathan are charged with one count of conspiracy, eight counts of computer fraud, six counts of wire fraud, two counts of securities fraud and six counts of aggravated identity theft.
Marimuthu is currently in a Hong Kong prison awaiting extradition to the United States following his conviction there on similar offenses but related instead to the Hong Kong stock market. Chockalingam Ramanathan remains at large.
According to the Department of Justice, the case is one of the first federal prosecutions in the United States of an online hack, pump and dump scheme.
"Although the basic concept behind the fraud alleged in the indictment is simple, the methods employed were sophisticated," U.S. Attorney for the District of Nebraska Joe W. Stecher said when the indictments were returned. "The investigation, therefore, required a savvy understanding of high-tech transactions and an ability to communicate and cooperate internationally."