Another Arrest in $290M Fraud Against Citibank and HSBC

Shahin Kashanchi was arrested a couple of days ago on charges of scheming with his brother-in-law Hassan Nemazee to defraud Citibank and HSBC of $290 million. Nemazee was arrested on August 25, 2009 and indicted for using fraudulent documents to secure loans from the victim banks, and executing a ponzi scheme against them by paying partial proceeds of the loans from one bank to the debts owed to the other and likewise.

Many of the fraudulent documents used in Nemazee's scheme were allegedly created by Kashanchi. Kashanchi would create fraudulent bank statements to help Nemazee secure additional loans, tricking the banks into thinking that funds existed to back the loans. Kashanchi allegedly also aided in fraudulent communications with the banks.

Kashanchi's charges of two counts of bank fraud each carry a maximum prison tern of 30 years and a maximum fine of $1 million, or twice the gain or loss of the crime.

Florida Attorney Pleads Guilty in Connection with $194 Million Hedge Fund Collapse

Won Sok Lee, 39, an attorney, formerly of Riviera Beach (Singer Island), Florida, and Irvine, California, plead guilty yesterday afternoon to one count of wire fraud in violation of Title 18 U.S.C. §1343 and one count of conspiracy to commit mail and wire fraud in violation of Title 18 U.S.C. §371. Lee is set to be sentenced on December 11, 2009 and faces a statutory maximum of 25 years in prison, a $500,000 fine, and restitution.

According to the FBI, Lee, along with John Kim and Yung Bae Kim, operated a massive investment fraud scheme that held approximately $194 million in investors' moneys. The scheme was a ponzi-type scheme, similar to Bernard Madoff's, where investors received "profits" out of money coming in from new investors. Lee had fled the country when charged late in 2006, but was located by federal authorities in South Korea in 2009 and extradited to the United States to face charges.

Lee admitted to a laundry list of unethical and illegal behavior, all of which can be found here at the FBI's official news story.

Hackers Selling their Product

Thomas James Frederick Smith, 21, and David Anthony Edwards, 20, have been indicted for conspiring to intentionally cause damage to a protected computer and commit computer fraud. The indictment allegedles that the two infected susceptible computers with an Internet Relay Chat (IRC) bot that would allow the two to direct the infected computer to repeatedly access an IP address of their choosing as part of a Distributed Denial of Service (DDOS) attack. The two infected numerous computers assembling a "botnet," a large number of computers infected with the IRC bot. After assembling the botnet, Smith demonstrated the botnet's ability to a potential buyer by deliberately flooding the IP address of ThePlanet.com, an internet service provider in Dallas.

The two are set for trial on November 16, 2009. They face up to five years in prison, a $250,000 fine, and restitution.

GUILTY PLEA: 130 Million Credit Card Number Stolen by Three People

Albert Gonzalez has pled guilty to stealing the credit cards he was charged with (see my prior post here). At sentencing, he faces up to 25 years in prison.

Department of Justice Reaches Largest Health Care Fraud Settlement Ever: $2.3 Billion

The Department of Justice has reached a $2.3 billion settlement with Pfizer for illegally marketing its anti-inflammatory drug Bextra. A common practice in the pharmaceutical industry, Pfizer representatives would advocate Bextra to doctors for untested or non-approved off-label uses. The settlement will return nearly a billion dollars to Medicare, Medicaid, and other government insurance programs.

Source: Department of Health and Human Services