Stock fraud suspects appear in court as US seeks extradition

The Jerusalem Magistrate’s Court on Wednesday extended the remand of two men the US wants to extradite over alleged involvement in a hacking and fraud scam that manipulated prices on the New York Stock Exchange.

Gery Shalon from Savyon and Zvi Orenstein from Bat Hefer were remanded in custody for a further 20 days while the extradition request is under review.

“These are serious crimes that were systematically carried out by an organized group of several criminals using advanced means,” the prosecutor said, noting that according to emails seized by police some of the alleged activities were still ongoing.

If convicted in the US, the men could face up to 20 years in prison.

The FBI estimates the incident is one of the biggest cyber-crimes in recent years and involved operatives in Moscow, Tel Aviv and Florida.

Israel Radio reported that 10 FBI agents had traveled to Israel to help local law enforcement catch the suspects.

Police spokesman Micky Rosenfeld confirmed that the men were detained on Monday as part of an ongoing investigation in cooperation with US officials, but declined to comment on the exact nature of the charges against them.

US Attorney Preet Bharara announced the arrests on Tuesday. A third defendant, a US-Israeli citizen who lives in Moscow and Tel Aviv, remained at large.

Since 2011, the men had manipulated trading in US securities from overseas, using fake identities to funnel millions of dollars in unlawful proceeds through a web of international shell companies, Bharara said.

The men sent false and misleading spam emails to millions of people about penny stocks in a pump-and-dump scheme, prosecutors said. Such schemes enable people to drive up the prices of stocks so they can sell at a peak before the truth about the securities is discovered and the prices plummet.

Charges in the case include multiple counts of conspiracy and securities fraud.

In a separate civil complaint, the Securities and Exchange Commission said the men controlled at least 20 stock promotion websites in which they sent multiple emails to people purporting to come from different and seemingly unrelated sources. In them, they urged that shares of various companies be bought as soon as possible, the lawsuit said.

It was unclear who is representing the men against the charges.

The case was unsealed by the US Securities and Exchange Commission on Tuesday as it filed its complaint in a Manhattan federal court against the perpetrators of a stock fraud.

The men were charged with manipulating penny stocks to pump prices “as high as 1,800 percent before dumping the shares for at least $2.8 million in illicit proceeds,” the SEC said in a statement.

The men were also linked to the hacking of several financial institutions computer systems last year, as a result of which the information of some 83 million customers was exposed. The hack, which targeted JP Morgan Chase & Co. as well as other firms, was one of the largest data breaches in history.

Police have arrested a total of five people in Israel allegedly tied to the computer hacks of JPMorgan and other financial institutions.

Rosenfeld said three Israeli citizens who were arrested last Thursday were arraigned in a Rishon Lezion Court, Reuters reported.

Judah Ari Gross contributed to this report.