A 33-year-old Israeli named Gary Shalon who allegedly took part in a scam operation involving securities will pay $403 million in a settlement with United States authorities.
According to the report, Shalon has been accused of computer hacking and identity theft, carried out during the execution of his scam.
The settlement, that was signed with the accused, the Ministry of Justice, and the US Securities and Exchange Commission (SEC), will bring to a close three criminal proceedings and one civil lawsuit against Shalon in the USA.
This might be the largest sum to be paid for a personal fine yet.
According to the terms of the settlement reported by Calcalist, Shalon has been released from the Manhattan federal prison after having been imprisoned for two years.
Time served in Israeli prison was taken off his term of imprisonment in the US. At this stage, and until the monetary settlement is paid in full, Shalon is under a travel ban in the US.
It remains unclear whether Shalon will return to Israel once the ban is lifted, or if he will return to his motherland of Russia, from where he emigrated to Israel as a child, the article states.
According to the report, Shalon has admitted to his involvement in the scam involving securities and other related cybercrimes.
The securities make up only one part of the $2 billion of assets that belong to him directly, and will be transferred to the authorities as part of the proceedings against him.
Shalon will be further required to hand over extensive information regarding the assets that he accumulated in recent years through gambling and forex businesses that he ran across the world, according to securities and banking documents that were found by the FBI.
The beginning of the investigation revealed that, in addition, Shalon held $100 million in Swiss bank accounts, which has now been frozen and transferred to US authorities.
Shalon had 81 bank accounts around the world, in countries including Switzerland, Georgia, Cyprus, and tax shelters such as the Virgin Islands.
These too held hundreds of millions of dollars, which will also be confiscated by the US Treasury.
Shalon is a key player in a case dating back to August 2014, when the computers of J.P. Morgan, a major US bank, were hacked and personal details belonging to 10 million households and 7 million businesses were stolen. This hack brought on a comprehensive investigation that included the FBI, its cybercrime task force, and the anti-money laundering task force in the homeland security department.
The investigation led to a rising suspicion that five individuals were involved in the hacking and theft of personal details, and that two of them were Israeli citizens – Gary Shalon and Ziv Orenstein. In 2015, with the assistance and cooperation of the Israeli police’s INTERPOL intelligence team in the Police Headquarters and the Lahav 433’s Cybercrime Unit, Shalon and Orenstein were arrested.
Three separate indictments were served against the two Israelis in the US, including charges of running an illegal business for monetary transfers, money laundering, online gambling, and securities offenses.
The Jerusalem District Court announced them as eligible for extradition, and they were extradited to the US about a year ago. Simultaneously, as is acceptable in the US, the SEC opened an administrative enforcement procedure with the aim of fining them.
Shalon was also accused of cyber-attacks that were executed on two financial institutions, E*Trade and Scottrade. The attacks allowed the perpetrators to steal client information, and to sell to clients stocks that the defendants themselves were selling.
In an indictment served by the state of New York, Shalon, Orenstein, and US citizen Joshua Samuel Aaron made use of the stolen details to concoct a comprehensive investor scam in the US, using at least 131 passports belonging to 17 different states and about 65 fake identification documents such as driver’s licenses.
Aaron, who escaped to Russia with the opening of the investigation, turned himself in to the American authorities a few months ago.
According to the charges, the partners identified low trade value companies in the American market as targets for the operation.
Shalon simultaneously established two straw companies, as Orenstein opened broker accounts in the US and Shalon gave orders as to how to manage them. Aaron also set up another straw company. The three used fake British and French passports for money laundering.
The scam operation was carried out in three stages. First, the three bought most or all free traded stocks in the chosen companies, which they held in their broker accounts.
They then proceeded to make consecutive scam deals including sending millions of fake emails to clients to show how the stocks’ value was dramatically increasing, encouraging their purchase. Lastly, after the stocks’ value increased in reality, the partners sold all of their stocks and illegally made millions of dollars.
The other partners to the scam sold their stocks as well, which made their value abruptly drop. The innocent investors were then faced with the harsh reality of losing substantial amounts of money.