Fraud in the News

Cybercrime is the new Wild West

Charges filed in U.S. District Court in Manhattan in two seemingly unrelated cases gives a small peek into the dark world of online crime, according to The New York Times article, The World Wide Web, the New Frontier in Fraud, by Peter J. Henning on July 27.

According to the article, in these cases, client information is swapped and the proceeds are sent over networks using new digital technology. What might tie them together is a suspected link to the hacking of JPMorgan Chase's network in 2014. The charges filed in the two cases make no mention of hacking into JPMorgan's network, and according to the article, it's unclear whether any of the bank's client contact information was used or sold. But there are hints at how defendants in one case might have used the information from the breach.

The article states that the security breach appears to have some connection to hackers operating in Russia. The Justice Department charged three men with securities fraud, identity theft and money-laundering conspiracy related to manipulation of penny stocks in 2011 and 2012, in pump-and-dump schemes.

According to the article, it might seem far-fetched that the JPMorgan breach figures into a penny-stock fraud. But the indictment accuses the three defendants of sending out spam that promoted the shares of various companies to generate buying interest, and this type of fraud needs a fresh supply of potential customers. Therefore, gaining access to the JPMorgan customer contact information could be valuable.

According to the article, while this might be just a coincidence, it shows the web of connections in the world of online crime and the challenges investigators face when they try to build cases.

Don't tell mummy the beneficiary's dead

According to the July 28 Korea Times article, Woman charged with fraud over ‘mummified' husband's body, by Jhoo Dong-chan, a woman surnamed Cho, 48, was indicted on charges of taking 200 million won (Korean currency) of her husband's allowance and retirement payments from his former workplace after not reporting his death. Cho kept the body of her dead husband at home for nearly seven years and will face charges of fraud.

According to the article, police found the husband, Shin, in December 2013 after neighbors reported a strange smell coming from the property. Shin, a former high-ranking official at the Ministry of Environment, died from liver cancer in March 2007. The article states that Cho claimed she thought he was alive and allegedly washed his body and changed his clothes every day. Shin's body was in a dehydrated and mummified state.

According to the article, it was later found that Cho visited the ministry and applied for voluntary retirement on behalf of her "sick husband" in November 2008.

Governance flaws in Toshiba's accounting scandal

On July 21, Toshiba Corp announced that its chief executive and president, Hisao Tanaka, would step down after an independent investigation found that the consumer electronics and engineering giant had overstated profits by a total of ¥151.8 billion ($1.22 billion) since 2008, according to the Fortune article, Toshiba just lost its CEO to a huge accounting scandal, by Geoffrey Smith on July 21. The investigation found that Tanaka had been aware the company had been inflating its profits over a number of years.

According to the article, this is the second big scandal of its kind in Japan in less than four years. In late 2011, executives at camera-maker Olympus were accused of orchestrating a $1.7 billion accounting fraud scheme.

The article states that Japan's finance minister, Taro Aso, called the accounting irregularities "very regrettable" and a blow to the country's efforts to regain the confidence of global investors.

According to the article, the company is likely to have to restate its earnings for the last six financial years.