E-Gold Admits Being Guilty of Enabling Internet Criminal Activity

According to an article in UPI, the three principal executives of E-Gold Limited have pleaded guilty in a case brought against them by the Department of Justice.

The three executives in question, Dr. Douglas Jackson, principal director of E-Gold and CEO of Gold & Silver Reserve Incorporated, and two of his senior directors (Barry Downey and Reid Jackson) pleaded guilty to conspiring to engage in money laundering and operating an unlicensed money transmitting business.

The corporations involved (E-Gold and Silver Reserve) face a fine of $3.7 million and have already agreed to pay a judgment of $1.75 million. Jackson faces up to 20 years in prison and a fine of $500,000 and Downey and Reid face a maximum of 5 years in prison and a $25,000 fine.

Anonymous means of transmitting money are favorite ways for criminals to conduct illegal business and scam people. In the current case, the Department of Justice charged that the criminal activity included investment scams, credit card fraud, identity theft and even child exploitation.

They did mention that E-Gold assigned employees to monitor accounts for fraud, but the employees allegedly didn't have any previous experience in dealing with illegal activity.

Another article in PC World about this story pointed to a blog post, where Douglas Jackson announced some new security procedures to verify their customers and prevent fraud. No new accounts are being opened until they can find out an "interim means" of verifying who their customers actually are. Also mentioned in the blog post was that a systems design flaw made it difficult for them to get rid of a user, effectively. The logic behind this seems to be that if one account was blocked another one would be opened. Please note that with all kinds of free e-mail accounts -- which was the only requirement to open an E-Gold account -- it wouldn't be very hard for a criminal to simply move on to another e-mail address if they got caught committing fraud.

It will be interesting to see how they plan to verify customers over the Internet.

In 2006, BusinessWorld reported that the ShadowCrew -- a 4,000 strong credit card fraud and identity theft ring operating in carder forums on the Internet -- used E-Gold to launder some of their proceeds.

To anyone familiar with crime on the Internet, allegations of criminals using, or manipulating E-Gold (or other services like these) are nothing new. E-Gold gives their customers the ability to transfer the value of gold, electronically. To transfer E-Gold -- which has a cash value -- all anyone needs is an e-mail address, account number and password.

E-Gold type accounts are also prone to take-overs. This normally occurs when account numbers and passwords are stolen via what is known as phishing and the account is taken over by a fraudster. After a crook compromises the account in this manner, they simply transfer the gold, elsewhere. Phishing is accomplished using social engineering or sometimes with the help of malware (crimeware) that automatically steals all the information from a system using keylogging software.

Please note from what I've heard, people are never made whole (compensated) after this happens to them. Once the money is transferred, there is little or no recourse to be had by the account owner. Interestingly enough, E-Gold spins this as there are no chargebacks to worry about. Chargebacks occur when a financial institution discovers a financial instrument was used to commit fraud and the transaction is charged back to the merchant.

So far as the money laundering aspect, a anonymous service such as E-Gold can be used to move the proceeds of all sorts of crimes. People are known to be duped in job scams to launder money using a service like this. In cases like these, they are taking all the risks for a small portion of the rewards.

In most instances, anyone who gets involved in one of these scam activities is going to at the very least lose their shirt in the process. Of course, they can also get arrested.

The best thing to do is to be extremely careful when someone offers you riches, or "gold" over the Internet. There is a difference big between real gold and what is known as "fools gold."

Major cybercrime and identity theft group smashed in NYC

It appears that the Manhattan District Attorney and the United States Secret Service have dealt a significant blow to a Internet crime ring dealing in stolen credit card information, cybercrime and identity theft.

The New York/New Jersey Electronic Crimes Task Force and a host of other agencies assisted in the investigation, also.

From the DANY press release:

Manhattan District Attorney Robert M. Morgenthau announced today the indictment of seventeen individuals and one corporation on charges related to global trafficking in stolen credit card numbers, cybercrime, and identity theft. Three defendants will be arraigned today.

The three defendants to be arraigned today are VADIM VASSILENKO, YELENA BARYSHEVA and JOHN WASHINGTON.

Six other defendants – TETYANA GOLOBORODKO, DOUGLAS LATTA, ANGELA PEREZ, KOSTAS KAPSIS, LYNDON ROACH and KEITH CUMMINGS – were arraigned earlier. Two defendants, EDUARD KHOLSTININ and OLEKSIY YARNE, are in custody in other states on unrelated charges and six other defendants are still being sought.

Also indicted is WESTERN EXPRESS INTERNATIONAL, INC., a corporation formerly headquartered in mid-town Manhattan at 555 Eighth Avenue. Western Express’s corporate officers are VADIM VASSILENKO and YELENA BARYSHEVA. TETYANA GOLOBORODKO was the manager of WESTERN EXPRESS.

Although not specified in the press release, most of the surnames of the indivduals involved appear to be Russian, or Eastern European. Most experts concede that Russian and Eastern European organized crime organizations are the major players in the stolen payment card information business.

The activity involved in this appears to highly organized, and technically sophisticated:

The Western Express Cybercrime Group carried out its criminal operations through a structure consisting of “vendors,” “buyers,” “cybercrime services providers,” and “money movers.” The “vendors” were individuals who sold large volumes of stolen credit card numbers and other personal identifying information through the internet. The “buyers” used the internet to purchase that information from the “vendors,” for the purpose of committing additional crimes such as larceny and identity theft. The “cybercrime services providers” promoted, facilitated, and aided in the purchase, sale and fraudulent use of stolen credit card numbers and other personal identifying information through various computer services that they provided to the “vendors” and the “buyers.” Finally, other defendants operated as “money movers.” Those defendants provided financial services and conducted financial transactions for other participants in the criminal enterprise in order to move funds and launder the proceeds of criminal activity. The “money movers” relied on anonymous digital currencies, such as Egold and Webmoney, to buy, sell, and launder the proceeds of criminal transactions, and conducted their business online, using websites, instant messaging, and email. Some of the defendants charged in the indictment played more than one role.

Those involved in the Western Express Cybercrime Group interacted and communicated through “carding” websites – that is, websites devoted to trafficking in stolen credit card and personal identifying information. They relied on the use of nicknames, false identities, anonymous instant messenger accounts, anonymous email accounts, and anonymous digital currency accounts to conceal the existence and purpose of the criminal enterprise, to avoid detection by law enforcement and regulatory agencies, and to maintain their anonymity.

The entire operation was set up under a business in Manhattan known as Western Express. This business appears to have been nothing more than a sophisticated money laundering operation:

The corporate defendant WESTERN EXPRESS INTERNATIONAL, INC., through its managerial agents VADIM VASSILENKO, YELENA BARYSHEVA, and TETYANA GOLOBORODKO, provided financial services designed to conceal the source and destination of funds earned through the trafficking of stolen credit card numbers and other personal identifying information, as well as the identity of individuals engaged in such transactions. They used conventional banks and money transmitters to move large sums of money for their clients, thus permitting their clients to remain anonymous and insulated from reporting requirements. They also provided information and assistance to other members of the group through the WESTERN EXPRESS websites Dengiforum.com and Paycard2000.com.

Apparently, this business had about $35 million flow through it's various accounts and is responsible for a known $4 million in credit card fraud. The investigation also revealed that they trafficked over 95,000 credit card numbers.

The press release stipulates that this is only what has been identifed thus far.

In February 2006, Western Express was also indicted for running an illegal check cashing/wire transfer service. Through it's various websites it offered one-stop financial services enabling Eastern European customers to do business in the United States and vice-versa.

This business was also a front for laundering the proceeds of a lot of fraud activity:

The investigation has revealed that their clients were involved in widespread illegality beyond the mere receipt of funds under fictitious aliases and addresses, including a variety of cyber-crimes such as “re-shipping” schemes and “phishing,” “spoofing” and spamming.

DANY press release, here.

USPIS Presents: Work@Home Scams: They Just Don't Pay!

The United States Postal Inspectors have produced a pretty telling video showing how Internet criminals lure people into taking jobs that will cause them financial and legal trouble.

The film entitled, Work@Home Scams: They Just Don't Pay shows what happens to people, who accept work-at-home jobs that aren't what they appear to be.

It also speaks to how this problem has grown from ads in the classified section of newspapers and magazines to being plastered all over the Internet.

A lot of us probably see spam e-mails offering these too good to be true jobs that don't make sense on a daily basis. You might also run into one of these scams on a job-site, such as Monster.com.

Another fact is that applying for one of these jobs can lead to giving up your personal information, which will later be used to steal your identity.

Please remember these scams still show up in the classified ads of newspapers and magazines, also.

Here is (what I consider) an interesting story about someone falling for one of these scams that should have known better (my opinion):

BBB Worker Takes Job Processing Fraudulent eBay Transactions

Why Mahmoud Ahmadinejad might not want transparency in Iran's financial dealings

Over the weekend, the press has been awash with a story that Iran is refusing to adhere with International money laundering standards.

It appears Mahmoud Ahmadinejad and his motley crew of religious extremists don't want anyone looking at their money flow "too closely." My guess is that it might reveal that some of the money is coming from questionable sources.

From the AFP:

The United States Friday welcomed action by an international anti-money laundering watchdog urging Iran to close loopholes in its financial system and take steps to limit terrorist financing.

US Treasury Secretary Henry Paulson said he was pleased with the statement earlier Friday by The Financial Action Task Force, which groups 34 countries, calling on the Islamic Republic to take action.

The Financial Action Task Force has taken a dramatic step in highlighting the significant threat Iran poses to the international financial system," Paulson said in a statement.

"As the premier standard-setting body for countering terrorist financing and money laundering, the FATF's expression of concern toward Iran speaks volumes."

Of course, it's probably not a coincidence that Iran is next door to Afghanistan, where opium production has reached an all-time high. Please note that most of the opium production is backed by the Taliban, who aren't exactly friendly towards the West, either.

In case, you are interested in a non-Western source -- which might support this contention read the Daily Times of Pakistan -- where they recently reported a large heroin/hashish bust on the border of Iran and Afghanistan, here.

What's interesting is that penalties in Iran for drugs are pretty harsh, despite the fact that they seem to have a drug problem within their country. If you continue to the bottom of this post, a video is referenced showing the drug problem in Iran.

The use of drugs is forbidden in the Islamic religion.

Nonetheless, it seems that if the money from drugs is for what they (Mahmoud and motley crew) and the Taliban perceive as a good cause, they seem to look the other way. Otherwise, it is logical that they would embrace financial transparency within their borders.

To sum this up, it's no secret that Iran supports and funds a lot of terrorist activity. The fall-out from this terrorist activity causes a lot of pain and suffering to a lot of people, worldwide.

Since drugs are forbidden by the Islamic religion, this clearly shows how Mahmoud Ahmadinejad and his motley crew of religious extremists are no more than a bunch of hypocrites.

A wise person once told me if you want to get to the bottom of a problem -- follow the money. It always tells the truth.

AFP story, here.

At the bottom of this post is a YouTube video, which shows a woman smoking heroin. It also shows that she has to prostitute herself to survive.

Women have been treated pretty harshly in Iran since religious extremists took over. This is part of an interesting series, which was aired on the CBC (Canadian Broadcasting Corporation).

Casual sex is highly frowned upon in Iran, also. If you take a look at the video, the woman stops at a pharmacy to purchase condoms. This would lead me to believe there is more casual sex in Iran than we are led to believe.

Mahmoud also claims there are no, or at least very few gay people in Iran. I'll bet the CBC, or another reputable news organization (given the proper resources) might prove him wrong about this, just like they did in this telling series.

I would guess that gay people have a vested interest in staying in the closet under his regime.

E Gold accused of being a money laundering vehicle for financial fraudsters and child pornographers

To anyone familiar with crime on the Internet, allegations of criminals using, or manipulating E Gold are nothing new. Like wire transfers, E-Gold gives their customers the ability to transfer the value of gold, electronically. To transfer the gold's value, all anyone needs is a e-mail address, account number and password.

Because of this, the accounts can be prone to phishing, and or crimeware (malware) attacks, using keylogging software. When this happens, the phishermen clean out the account and transfer it, elsewhere. E-Gold's terms of service stipulate that once a transfer is done, it cannot be reversed.

It should be noted that Internet criminals use wire transfer services (MoneyGram, Western Union) for the same reason -- they provide a lot of anonymity.

Apparently a task force from the Department of Justice has been looking into the money laundering angle, and is charging E Gold with several federal charges.

Here is a summary of the action against E Gold from the DOJ press release:

A federal grand jury in Washington, D.C. has indicted two companies operating a digital currency business and their owners on charges of money laundering, conspiracy, and operating an unlicensed money transmitting business, Assistant Attorney General Alice S. Fisher of the Criminal Division and U.S. Attorney for the District of Columbia Jeffrey A. Taylor announced today.

The basis of the DOJ charges are:

The indictment alleges that E Gold has been a highly favored method of payment by operators of investment scams, credit card and identity fraud, and sellers of online child pornography. The indictment alleges that the defendants conducted funds transfers on behalf of their customers, knowing that the funds involved were the proceeds of unlawful activity; namely child exploitation, credit card fraud, and wire (investment) fraud; and thereby violated federal money laundering statutes. The indictment further alleges that the defendants operated the E Gold operation without a license in the District of Columbia or any other state, or registering with the federal government, and thereby violated federal and state money transmitting laws. The indictment alleges that this conduct occurred at various times from 1999 through December 2005.

It appears a lot of different federal agencies worked on this investigation:

The case is being investigated by the U.S. Secret Service with the assistance of the IRS and the FBI. The case is being prosecuted by the U.S. Attorney’s Office for the District of Columbia and the Computer Crime and Intellectual Property Section of the Criminal Division. Assistance is also being provided by the Child Exploitation and Obscenity Section and the Asset Forfeiture and Money Laundering Section of the Criminal Division.

Full DOJ press release, here.

Besides allegedly being used to launder money, E Gold is often used in advance fee and auction scams, which trick people into sending their hard earned cash to fraudsters. I've written about the auction, secret shopper, romance, lottery and job variations of advance fee scams on this blog, frequently.

Like the problems with accounts being phished, or their value being drained because of crimeware, little can be done once the gold (converted to a monetary value) has been transferred.

When password details can be stolen, accounts can be taken over, also. This happens happens frequently on auction sites; when trusted accounts are compromised, then used for fraudulent purposes.

Wikipedia has an extensive article about Advance Fee (419), here.

It will be interesting to see how this plays out!

IT Students Aren't the Only Human Resources that Internet Criminals Desire

In the past couple of days, I've seen a lot of articles about IT (Information Technology) students being taken to the dark-side (recruited) by organized crime.

Reuters is quoting a McAfee report released in the past couple of days.

Although, hiring IT students seems to be the latest story going around, recruiting people to commit Internet crime is nothing new. As the article aptly states, organized crime has the money to recruit whatever experts they need.

And IT students aren't the only ones being recruited.

Starting with the fall of the (Soviet Union) "evil empire" and the rise of Eastern European organized crime, there have been a lot of "technical experts" being used for nefarious purposes. The Reuters article mentions that the tactics being used are the same ones used by the KGB to recruit spies.

In fact many experts speculate that Eastern European crime has a lot of "highly placed" former KGB types in their ranks.

In 1997, FBI Director Louis Freeh stated before Congress:

The Russian syndicates conduct the most sophisticated criminal operations ever seen in the United States, based on their access to expertise in computer technology, encryption techniques and money-laundering facilities that process hundreds of millions of dollars.

According to Freeh, part of that expertise is said to be provided by "former KGB officers working directly with some of those organized crime groups, and that poses an additional level of threat and sophistication.

Story courtesy of Risk Assessment Services, here.

And Russian organized criminals aren't the only players out there.

Dr. Phil Williams, a visiting CERT (Computer Emergency Readiness Team) scientist wrote about this a few years ago:

In recent years, there has been a significant increase in the sophistication of organized crime and drug trafficking groups. Colombian drug trafficking organizations, for example, have followed standard business practices for market and product diversification, exploiting new markets in Western Europe and the former Soviet Union. Criminal organizations and drug traffickers have increasingly hired financial specialists to conduct their money laundering transactions. This adds an extra layer of insulation while utilizing legal and financial experts knowledgeable about financial transactions and the availability of safe havens in offshore financial jurisdictions. Similarly, organized crime does not need to develop technical expertise about the Internet. It can hire those in the hacking community who do have the expertise, ensuring through a mixture of rewards and threats that they carry out their assigned tasks effectively and efficiently.

Dr. Williams full essay, here.

Although, I'm sure IT students are being recruited -- they probably aren't the first -- or the only type of experts being hired.

And there are a lot of disorganized criminals recruiting people, also.

Here are a some previous posts, I've done on so-called "disorganized criminals," who recruit other people to do their "dirty work."

Work at Home Scams

Cyber Gangs Luring Children to Launder Money

BBB Worker Takes Job Processing Fraudulent eBay Transactions