Students in Cyber Crime Ring

Thursday, January 6, 2011 @ 08:01 AM gHale

With an understanding it is very difficult to find and arrest anyone able to hack into a system and abscond with information or money, federal agents busted two foreign-exchange students suspected to be part of a sophisticated cyber crime ring based in Vietnam.

“It’s a big one,” said Jason Calhoun, a fraud investigator with the Rosetta Stone language software company who has been working on the case with federal agents.

While it is not focused on the manufacturing automation sector, several major companies were hit in the scam, including eBay, PayPal, Amazon, Apple, Dell and Verizon Wireless, according to federal court documents and Calhoun.

The operation centers around stolen identities used to open accounts with eBay, PayPal and U.S. banks, officials said. Through those accounts, the fraudsters sell popular, expensive merchandise at discounted prices. The sellers fill the orders by purchasing the goods from other vendors using stolen financial accounts. When the identity-theft victims protest the charges, the merchants end up losing out.

The two Winona State University students controlled more than 180 eBay accounts and more than 360 PayPal accounts opened using stolen identities, according to documents unsealed by a federal magistrate judge in St. Paul.

Investigators found the two Winona students collected nearly $1.25 million, much of which went to accounts in Vietnam and Canada, according to an affidavit filed by Daniel Schwarz, an agent with Homeland Security Investigations in Minnesota. Schwarz is working on the case with the National Cyber Crimes Center (C3) in Washington, D.C. The center is part of U.S. Immigration and Customs Enforcement.

The two Winona students contributed to $1 million in fraudulent credit card orders for Rosetta Stone software, which ended up charged back to the company, Schwarz said in his affidavit.

The students, Tram Vo and Khoi Van, have F1 visas that allow them to study at the university, but not work outside of the school, the government said.

Schwartz said in his affidavit the rings involve an “elaborate network” of specialists, including computer hackers, vendors of stolen identities and financial information, fraud managers and facilitators, money mules and shippers. The members communicate through a secure web site “accessed by vetted members only.”

Investigators say the fraudsters, hiding behind proxy Internet addresses, pose as eBay sellers using stolen identities, offering heavily discounted merchandise for popular items like software, video games, textbooks and Apple iTunes gift cards.

But the fraudsters don’t actually have the merchandise. So when someone buys the products on eBay using a credit card or PayPal account, the fraudsters collect the payments and order the merchandise — at full price — from third-party vendors using stolen identities. The goods then ship to eBay buyers, and victims of the stolen identities end up billed for products they neither ordered nor received. After they protest, the banks issue “chargebacks” to the vendors.

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