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Dumb or Genius?
Matthew S. Kichinka, 25, of Strongsville, Ohio, has been charged with fifty counts of wire fraud.
| "...Part of the scheme, according to a release from the U.S. Attorney's Office, was to transmit about 50 interstate electronic funds transfers (EFTs) from various banks to Ameritrade and E*Trade totaling approximately $3,348,000. The indictment alleges that after opening the online accounts, Kichinka placed stock purchase orders for hundreds of thousands of shares of stock before the EFTs were returned by the issuing bank as fraudulent, forcing Ameritrade and E*Trade to suffer losses of $341,113.63..." |
So, let read behind the lines. The schema works something like this:
- open an account using false identity
- fund it from non-existing accounts (stealing of accounts is not noted anywhere)
- buy, buy, buy
- run away without any profiting, as to the time you can withdraw anything, the bank will let brokerage know that account is bad.
So, what’s the goal? The only one I can see is to hit hard Ameritrade and E*Trade (am I missing something?). The only way to do this is to carefully select stocks that, despite massive buying, will drop in price in couple days. Hmm, is this realistic? According to numbers - yes.
EFT transaction fails for non-sufficient funds in 2-3 days (to have any other type of failure, one would have to find existing account with the same name and with more than $100,000, the average account size, available). The total loss is $341,113.63/$3,348,000, ~10.2%. Shorting something that drops 10.2% in 3 days would give more than 135,000% income annually… Oh, man, I want this guy to manage my hedge fund!