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Teenager accused of sophisticated investment fraud

A Pennsylvania teenager has been accused of a sophisticated scheme to unload worthless stock options by hacking into another man's investment account and using it to buy the securities from him.

According to court filings on Thursday by the Securities and Exchange Commission and federal prosecutors in Boston, Van Dinh, 19, a college student, used a blend of computer crime, securities fraud and identity theft to dump stock options in Cisco Systems last July, about a week before they were going to expire and cost Dinh as much as US$100,000.

"We have never brought a case like this one," said John Reed Stark, the chief of the office of Internet enforcement for the commission, who said that the case stood apart from its 424 Internet-related cases.

According to the filings, Dinh contacted members of an online stock-pickers forum offering a software program that he said would help them with stock charts. The victim, who lives in Massachusets, accepted the offer and downloaded the software, which was in fact a rogue program known as "The Beast" that allowed Dinh to monitor every keystroke typed on the target machine. Dinh used the program to obtain the login and password for the victim's online brokerage account with TD Waterhouse.

Investigators assert that Dinh then used the information to concoct a trade in which he sold 7,200 of the soon-to-be worthless Cisco options for US$5 apiece, saving himself about US$37,000 that he would have otherwise lost when the options expired without a buyer a few days later.

The victim quickly discovered that US$47,000 was missing from his brokerage account and that he was holding a large number of worthless stock options he had not bought. Although, SEC investigators said, Dinh tried to cover his tracks by using Internet service providers in Ireland, Germany and Australia, and also used software that cloaks the user's identity, they were able to quickly determine that he was the original owner of the options. They found other lines of evidence as well.

"No matter how many steps someone takes to cover their tracks, there are just too many trails," Stark said, adding that he and his colleagues were shocked by the defendant's youth.

"While many 19-year-old kids are facing prosecution for unlawful dowloading of music, this 19-year-old is facing a far more serious prosecution," he said.
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