14 DAY TRIAL // A Texas man was charged for instrumenting a pump-and-dump stock fraud scheme that used botnets to promote the penny stock of several companies.
Christopher Rad, 42, of Cedar Park, Texas, was arrested by the FBI this Monday after being indicted on one count of conspiracy to commit securities fraud.
According to the authorities, between November 2007 and February 2009, Rad hired spammers and foreign botnet operators to send unsolicited emails promoting the penny stocks of companies RSUV (Remote Surveillance Technologies) and VSHE (VShield Software).
The goal was to artificially inflate the volume and price of these stocks so he can sell his share for a considerable profit at the right moment.
In addition to spamming, the fraudster also hired hackers to break into the brokerage accounts of other traders, liquidate their existent stocks and buy shares of those intended for manipulation.
One of Rad's co-conspirators, James Bragg, 42, of Chandler, Arizona, who maintained the relationships with Russian hackers, pleaded guilty to fraud charges in October 2010.
A third participant in the scheme falsified documents and submitted them to attorneys with the purpose of obtaining opinion letters to lift stock trading restrictions.
Conspirators also traded stocks between themselves in order to falsely create the impression they were active. This was usually done before the start of each spam campaign.
A Russian hacker identified as "B.T." and a botnet operator with the initials "D.S." are also named in the indictment, but haven't been arrested yet.
According to the Department of Justice, Rad faces a sentence of maximum five years in prison and a fine of up to $250,000.
Agents from the FBI's Newark Field Office were in charge of the investigation and the prosecution will be handled by Assistant U.S. Attorneys Christopher Kelly of the U.S. Attorney’s Office Economic Crimes Unit and Erez Liebermann, Deputy Chief of the Economic Crimes Unit and Chief of the Computer Hacking and Intellectual Property Section.