Technology

California Indictment in Russian Hacks


A Russian computer programmer imprisoned in the U.S. on charges that he

perpetrated a cyber crime spree of extortion and credit card fraud was

indicted in California Wednesday-- adding the Golden State to a growing

list of destinations on the accused hacker's whirlwind tour of U.S.

detention centers.

Alexey V. Ivanov, 20, was slammed with fifteen counts of computer fraud

and extortion for the Southern California portion of a string of

financially-motivated attacks on e-commerce companies and small financial

institutions, aimed at stealing credit card numbers and consumer

information, and strong-arming companies into paying protection money.

The federal indictment charges that Ivanov cracked San Diego-based CTS

Network Services, and then used the ISP's system to attack other sites.

Other victims named in the indictment are Nara Bank in Los Angeles,

TransMark Corporation in Rancho Cucamonga, Calf., and Maryland-based

E-Money, Inc., an online credit card processing company.

"Given the importance of computers in everyday life, hackers and

cyber-extortionists pose one of the most significant challenges to law

enforcement," said United States Attorney John S. Gordon in a statement.

Credit Card Fraud in Reverse

The indictment also charges that Ivanov "and others" attempted to plunder

Sterling Microsystems, an Anaheim, California-based online credit card

processing firm. The Sterling scam hinged on a kind of reverse credit card

fraud, in which Ivanov and his gang allegedly used Sterling's merchant

account to issue credits in amounts ranging from $5,000 to $25,000 to

credit cards under their control. The indictment does not allege that the

fraud was successful.

In February, 2000, Ivanov also allegedly emailed Sterling, and threatened

to damage the company's systems, unless it agreed to hire him as a

computer security consultant.

Notwithstanding his alleged propensity for international financial crime,

Ivanov appears qualified for IT work: A resume he distributed online in

1999 lists work experience with a Russian ISP and a medical center, and

boasts a wide range of computer and networking skills, including

"excellent" programming ability in C, C++ and assembly language dating

back to when he was thirteen years old.

Ivanov is currently held without bail in Rhode Island. His attorney did

not return phone calls.

The Russian will be arranged in Southern California only after dealing

with similar charges already pending in Seattle, Washington and New Haven,

Connecticut. Given the scope of the alleged scam, and the random

geographic distribution of Internet locations, the list of federal

prosecutors waiting in line for the accused hacker could grow even longer.

"Double jeopardy prohibits him for being indicted twice for the same

offense, but he can be indicted separately for each and every company that

he extorted," says former computer crime prosecutor Marc Zwillinger, now

an attorney with Kirkland & Ellis. "If he broke into separate computers,

those are separate offenses in separate jurisdictions."

Controversial FBI tactics

Ivanov's arrest last November was the result of an elaborate sting

operation by the FBI, in which agents used a fake job offer from a phony

company -- 'Invita Security, Inc.' -- to lure Ivanov, along with alleged

crime partner Vasili Gorchkov, into the U.S.

Before they were arrested, the two men were invited to log in to their

computer in Russia from the 'Invita' offices. Meanwhile, FBI agents

secretly monitored their keystrokes, and subsequently used the information

to crack the suspects' computer and download its contents over the

Internet.

The agents obtained a U.S. search warrant only after cracking the computer

and downloading the information, and never contacted Russian law

enforcement officials. The tactics raised eyebrows with some computer

security experts and attorneys, and the search apparently violates Article

272 of the Russian Criminal Code, which punishes "Unlawful Access to

Computer Information" with up to two years in prison. But the federal

judge overseeing the Seattle case ruled last month that the downloaded

evidence could be used in court, finding that the FBI wasn't subject to

Russian law. By Kevin Poulsen


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