Fraudster who hired hackers to manipulate stock prices goes to prison

The central organizer of a worldwide conspiracy to manipulate stock prices through a “botnet” network of virus-controlled computers was sentenced today to 71 months in prison and was ordered to pay a $30,000 fine.

44-year-old Texas resident Christopher Rad was previously convicted of six counts arising from the fraud scheme: conspiring to further securities fraud using spam; conspiring to transmit spam through unauthorized access to computers; and four counts of transmission of spam by unauthorized computers.

According to documents filed in this case and statements made in court, Rad conspired with stock promoters in a scheme to manipulate the price and volume of dozens of particular stocks, including stocks with ticker symbols RSUV, QRVS, VSHE, SVXA and ASIC, in order to later sell them at an artificially inflated price – a practice known as a “pump and dump” scheme. The scheme began as early as November 2007 and continued through February 2009.

As part of the scheme, Rad organized others to manipulate the stock prices. He sought out and engaged spammers, then sent them precise language to include in their spam campaigns.

The spammers included two individuals who distributed spam to promote the stocks Rad wanted to manipulate through botnets.

Rad, who went by the alias “billy_sack,” communicated with the spammers by Skype, in most instances knowing them only by their aliases. During the 22-month conspiracy, Rad paid the spammers more than $1.4 million, making payments through e-Gold and money wires. Payments intended for a botnet operator in Russia were made through at least eight different countries. The wire instruction notations included false information such as payments for “Dell Monitors,” “touch panels” and “transportation services.”

Rad also agreed with others to engage in bad-faith purchases of RSUV to create the impression among spam recipients that there was active trading in the stock.

At the same time, hackers hacked into the brokerage accounts of third parties, liquidated the stocks in those accounts, then used the accounts to purchase shares of some of the stocks the scheme sought to manipulate. This increased the volume of shares being traded and created an impression that the stocks were worth purchasing.

In all, Rad made approximately $2.8 million from his schemes.

Rad’s coconspirators, Doyle Scott Elliott and James Bragg, previously pleaded guilty to securities fraud and transmission of spam through falsely registered e-mail addresses. They await sentencing.

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