The FBI has indicated a California man for an ingenious scam that bilked US$50,000 -- a few pennies at a time -- from online brokerage companies E*trade and Schwab.com during a six-month period beginning in November 2007.
The FBI alleges that the man, Michael Largent of Plumas Lake, California, exploited a backdoor in a procedure both brokerage houses use when customers initially link their brokerage accounts to a bank account.
In this procedure, which ensures that the account numbers and routing information are correct, the brokerages automatically send what the indictment calls "micro-deposits" ranging from one cent to US$2 to the bank account, asking the customer to verify that they've received it.
The FBI alleges that Largent used a script to open 58,000 online accounts with the brokerages. According to the FBI, Largent's automated script created fictitious names, driver's license numbers, addresses and Social Security numbers for the brokerage accounts.
The aliases included numerous cartoon characters, such as Johnny Blaze, Speed Apex, Hank Hill and Rusty Shackelford, according to the indictment.
In its indictment, the FBI alleges that Largent opened bank accounts at E*Trade, Capital Bank, Metabank, Green Dot, Skylight and others. He then linked them to the fraudulent brokerage accounts to collect the micro-deposits. The FBI alleges that Largent converted the money he collected into pre-paid debit cards.
A separate Secret Service search warrant affidavit on May 7 claimed Largent attempted a similar scam against Google's Checkout service. The affidavit alleges he stole US$8,225.29 from eight accounts at Bancorp Bank.
Largent, who is free on bail, has been charged in Eastern District of California's federal court in Sacramento with four counts each of computer fraud, wire fraud and mail fraud.
Largent's scheme was uncovered as a result of the USA Patriot Act's requirement that financial services companies confirm their customers' identity. Schwab.com learned in January that someone had opened more than 5,000 online accounts with fictitious information.
When the Secret Service investigated, it discovered more than 11,000 Schwab accounts had been opened under the name "Speed Apex" from just five IP addresses; all of those addresses traced back to Largent's internet service provider, AT&T.
See original article on scmagazineus.com