FBI uncover trader accused of $50m fraud

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The Independent US

One week after the most spectacular share-dealing fraud of the internet era, federal agents hauled a 23-year-old business student and amateur stock trader into court yesterday, accusing him not only of putting out a bogus news release about the hi-tech company Emulex Corp but also of making a $250,000 profit on the havoc he had unleashed.

One week after the most spectacular share-dealing fraud of the internet era, federal agents hauled a 23-year-old business student and amateur stock trader into court yesterday, accusing him not only of putting out a bogus news release about the hi-tech company Emulex Corp but also of making a $250,000 profit on the havoc he had unleashed.

Mark Simeon Jakob was arraigned a day after being arrested in a dawn raid on his parents' home in El Segundo, an industrial suburb just south of Los Angeles airport. According to the Federal Bureau of Investigation, the scam was elaborate and well-planned, but still relatively easy to track down because of the digital footprints left all over the internet.

"The amazing thing is that he thought he would get away with it," said FBI Special Agent Richard Wade.

US Attorney Alejandro Mayorkas said yesterday: "Anyone who would use the internet to commit a crime should understand one thing: Do not count on the anonymity of the internet to serve as a shield for your illegal conduct."

Last Friday, stock in Emulex - a southern California company that makes high-speed data storage products - fell 62 per cent in just 16 minutes because of a news release saying its accounting practices were under investigation, its latest profit statement was about to be reissued as a loss, and its chief executive was resigning. Investors lost an estimated $50m.

Trading of Emulex stock was halted on the Nasdaq exchange as it emerged that the information - put out by an online business news service called Internet Wire - was entirely false. Mr Jakob had worked at Internet Wire until one week before the hoax, and according to his prosecutors he took advantage of his insider knowledge to pull the wool over the eyes of his erstwhile colleagues.

In his computer-trading activities, Mr Jakob had taken a loss of around $80,000 by "going short" on Emulex stock - betting, wrongly, that the share price would go down when in fact it went up. Prosecutors believe he concocted the hoax to recoup his money and make more besides.

According to his accusers, Mr Jakob tried his best to cover his tracks. He e-mailed the bogus news release from the computer lab at El Camino Community College, where he was enrolled. He then treated himself to the fancy Luxor hotel in Las Vegas and made his stock transactions from the business centre of the Mandalay Bay next door.

Prosecutors had little difficulty tracing the source of the original e-mail, however, and even found eye-witnesses who saw Mr Jakob in the computer lab. They found his stock transaction history, his hotel booking in Las Vegas and his employment history at Internet Wire. In fact, he was their number one suspect from the outset.

According to the FBI, which has developed special units to combat online crime, from share fraud to stalking to paedophile sex, the internet offers an illusion of anonymity that is in fact relatively easy to break.

A few months ago, a day trader who put out a bogus release about the telecommunications firm Lucent was quickly caught, as was a fraudster who tried to manipulate the stock price of Pairgain Technologies, a Californian hi-tech firm, last year.

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