Eleven Charged in Massive ID Theft Scheme

Eleven people have been charged or indicted in a massive identity theft and computer fraud scheme involving some of the largest data breaches in recent U.S. history, the U.S. Department of Justice announced Tuesday.

The participants in the scheme targeted nine U.S. retailers, including BJ's Wholesale Club, TJX and DSW Shoe Warehouse, DOJ officials said. Those three retailers all announced large data breaches between 2004 and 2007. OfficeMax, Barnes & Noble, Boston Market, Sports Authority and Forever 21 also were targeted.

The ID theft ring stole more than 40 million credit and debit card numbers, said Michael Sullivan, U.S. attorney for the District of Massachusetts. The criminals installed sophisticated "sniffer" programs on the retailers' networks, allowing them to collect credit card and password information, he said during a press conference.

This case is believed to be the largest hacking and ID theft case the DOJ has ever prosecuted, said U.S. Attorney General Michael Mukasey.

"This case highlights our increasing vulnerability to the theft of personal information," he added during a press conference. "Computer networks and the Internet are an indispensable part of the world economy. But even as they provide extraordinary opportunities for legitimate commerce and communication, they also provide extraordinary opportunities for criminals. Where criminals are able to breach computer security systems, as alleged here, they have enormous ability to cause harm."

On Tuesday, a federal grand jury in U.S. District Court for the District of Massachusetts indicted Albert "Segvec" Gonzalez of Miami on charges of computer fraud, wire fraud, access device fraud, aggravated identity theft and conspiracy for his role in the scheme.

The DOJ also announced charges Tuesday against Christopher Scott and Damon Patrick Toey, both of Miami.

Other defendants face numerous charges in California and New York, the DOJ said.

Three of the defendants are U.S. citizens, one is from Estonia, three are from Ukraine, two are from China and one is from Belarus, the DOJ said. One individual is only known by an online alias, and his place of origin is unknown.

After collecting the data, the defendants allegedly concealed it in encrypted servers they controlled in Eastern Europe and the U.S., the DOJ said. They allegedly sold some of the credit and debit card numbers on the Internet to other criminals. The stolen numbers were cashed out by encoding card numbers on the magnetic strips of blank cards.

The defendants then used these cards to withdraw tens of thousands of dollars at a time from cash machines, the DOJ said. Gonzalez and others were allegedly able to conceal and launder their fraud proceeds by using anonymous Internet-based currencies and by channeling funds through bank accounts in Eastern Europe, the DOJ said.

The U.S. Federal Trade Commission has sought sanctions against TJX, DSW and BJ's for their alleged failure to take appropriate security measures to protect customer information.

Gonzalez was previously arrested by the Secret Service in 2003 for access device fraud. During the course of that investigation, the U.S. Secret Service discovered that Gonzalez, who was working as a confidential informant for the agency, was involved in this case, the DOJ said.

Gonzalez faces life in prison if he is convicted of all the charges alleged in the Massachusetts indictment.

Also on Tuesday, indictments were unsealed in U.S. District Court for the Southern District of California in San Diego against alleged participants Maksym "Maksik" Yastremskiy of Kharkov, Ukraine, and Aleksandr "Jonny Hell" Suvorov of Sillamae, Estonia.

The two are charged with crimes related to the sale of the stolen credit card data that Gonzalez and others illegally obtained, as well as additional stolen credit card data.

Suvorov is charged with conspiracy to possess unauthorized access devices, possession of unauthorized access devices, trafficking in unauthorized access devices, identity theft, aggravated identity theft, and aiding and abetting. Yastremskiy is charged with trafficking in unauthorized access devices, identity theft, aggravated identity theft and conspiracy to launder monetary instruments.

An indictment against Hung-Ming Chiu and Zhi Zhi Wang, both of China, and a person known only by the online nickname "Delpiero," was also unsealed in San Diego Tuesday.

Chiu, Wang and Delpiero are charged with conspiracy to possess unauthorized access devices, trafficking in unauthorized access devices, trafficking in counterfeit access devices, possession of unauthorized access devices, aggravated identity theft, and aiding and abetting.

Also in San Diego, Sergey Pavolvich of Belarus, and Dzmitry Burak and Sergey Storchak, both of Ukraine, were charged in a criminal complaint with conspiracy to traffic in unauthorized access devices.

The San Diego charges allege that Yastremskiy, Suvorov, Chiu, Wang, Delpiero, Pavolvich, Burak and Storchak operated an international stolen credit and debit card distribution ring with operations from Ukraine, Belarus, Estonia, China, the Philippines and Thailand. The indictments allege that each of the defendants sold stolen credit and debit card information. The indictment of Yastremskiy alleges that he made more than US$11 million from this criminal activity.

These indictments and complaints are the result of a three-year undercover investigation conducted out of the San Diego Field Office of the U.S. Secret Service.

In May, Gonzalez, Suvorov and Yastremskiy also were charged in a related indictment in the U.S. District Court for the Eastern District of New York.

The New York charges allege that the trio were engaged in a sophisticated scheme to hack into computer networks run by the Dave & Buster's restaurant chain, and stole credit and debit card numbers from at least 11 locations. Specifically, the indictment alleges that the defendants gained unauthorized access to the cash register terminals and installed packet sniffers on them.

At one restaurant location, the packet sniffer captured data for approximately 5,000 credit and debit cards, eventually causing losses of at least $600,000 to the financial institutions that issued cards, the DOJ said.

Gonzalez is currently being held in jail on the New York charges. Turkish officials apprehended Yastremskiy in July 2007 in Turkey when he traveled there on vacation. He has been jailed there since then, pending the resolution of related Turkish charges, and the U.S. has made a formal request for his extradition. At the request of the DOJ, Suvorov was apprehended by the German Federal Police in Frankfurt in March 2008 on the San Diego charges when he traveled there on vacation. He is currently in jail pending the resolution of extradition proceedings.

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