Securities: Fraud Scam Affects Online Stock Trading

The U.S. Justice Department plans to step up enforcement of online brokerage account fraud that targets those accessing their accounts at public places such as hotels and internet cafes. The first criminal case based on such charges was released in March. Since December, five civil complaints have been brought by the U.S. Securities and Exchange Commission.

Fraud Scam Targets Online Stock Trading

Scams of this nature cost E*Trade Financial $18 million last year. Ameritrade says that they lost $4 million. Shawn Henry, the deputy assistant director of the Federal Bureau of Investigation's Cyber Division, says that "I don't want it to be this panic, but the fact of the matter is that everyone's vulnerable. We are very focused on it." The fraud utilizes the old pump-and-dump scheme in which a stock is hyped to artificially increase its price. When investors access a public computer to check stock holdings or to make a trade, his or her user names and password can be stolen. Another member of the crime ring then opens an online trading account and buys shares of a low-price, not very traded stock. They then use the investor's account, liquidate it, and use the money to purchase securities that they already own.