Ne'er-Do-Well News

Two Charged in SIM Swapping, Vishing Scams

Two young men from the eastern United States have been hit with identity theft and conspiracy charges for allegedly stealing bitcoin and social media accounts by tricking employees at wireless phone companies into giving away credentials needed to remotely access and modify customer account information.

Prosecutors say Jordan K. Milleson, 21 of Timonium, Md. and 19-year-old Kingston, Pa. resident Kyell A. Bryan hijacked social media and bitcoin accounts using a mix of voice phishing or “vishing” attacks and “SIM swapping,” a form of fraud that involves bribing or tricking employees at mobile phone companies.

Investigators allege the duo set up phishing websites that mimicked legitimate employee portals belonging to wireless providers, and then emailed and/or called employees at these providers in a bid to trick them into logging in at these fake portals.

According to the indictment (PDF), Milleson and Bryan used their phished access to wireless company employee tools to reassign the subscriber identity module (SIM) tied to a target’s mobile device. A SIM card is a small, removable smart chip in mobile phones that links the device to the customer’s phone number, and their purloined access to employee tools meant they could reassign any customer’s phone number to a SIM card in a mobile device they controlled.

That allowed them to seize control over a target’s incoming phone calls and text messages, which were used to reset the password for email, social media and cryptocurrency accounts tied to those numbers.

Interestingly, the conspiracy appears to have unraveled over a business dispute between the two men. Prosecutors say on June 26, 2019, “Bryan called the Baltimore County Police Department and falsely reported that he, purporting to be a resident of the Milleson family residence, had shot his father at the residence.”

“During the call, Bryan, posing as the purported shooter, threatened to shoot himself and to shoot at police officers if they attempted to confront him,” reads a statement from the U.S. Attorney’s Office for the District of Maryland. “The call was a ‘swatting’ attack, a criminal harassment tactic in which a person places a false call to authorities that will trigger a police or special weapons and tactics (SWAT) team response — thereby causing a life-threatening situation.”

The indictment alleges Bryan swatted his alleged partner in retaliation for Milleson failing to share the proceeds of a digital currency theft. Milleson and Bryan are facing charges of wire fraud, unauthorized access to protected computers, aggravated identity theft and wire fraud conspiracy.

The indictment doesn’t specify the wireless companies targeted by the phishing and vishing schemes, but sources close to the investigation tell KrebsOnSecurity the two men were active members of OGusers, an online forum that caters to people selling access to hijacked social media accounts.

Bryan allegedly used the nickname “Champagne” on OGusers. On at least two occasions in the past few years, the OGusers forum was hacked and its user database — including private messages between forum members — were posted online. In a private message dated Nov. 15, 2019, Champagne can be seen asking another OGusers member to create a phishing site mimicking T-Mobile’s employee login page (t-mobileupdates[.]com).

Sources tell KrebsOnSecurity the two men are part of a larger conspiracy involving individuals from the United States and United Kingdom who’ve used vishing and phishing to trick work-at-home employees into giving away credentials needed to remotely access their employers’ networks.

The Now-Defunct Firms Behind 8chan, QAnon

Some of the world’s largest Internet firms have taken steps to crack down on disinformation spread by QAnon conspiracy theorists and the hate-filled anonymous message board 8chan. But according to a California-based security researcher, those seeking to de-platform these communities may have overlooked a simple legal solution to that end: Both the Nevada-based web hosting company owned by 8chan’s current figurehead and the California firm that provides its sole connection to the Internet are defunct businesses in the eyes of their respective state regulators.

In practical terms, what this means is that the legal contracts which granted these companies temporary control over large swaths of Internet address space are now null and void, and American Internet regulators would be well within their rights to cancel those contracts and reclaim the space.

The IP address ranges in the upper-left portion of this map of QAnon and 8kun-related sites — some 21,000 IP addresses beginning in “206.” and “207.” — are assigned to N.T. Technology Inc. Image source: twitter.com/Redrum_of_Crows

That idea was floated by Ron Guilmette, a longtime anti-spam crusader who recently turned his attention to disrupting the online presence of QAnon and 8chan (recently renamed “8kun”).

On Sunday, 8chan and a host of other sites related to QAnon conspiracy theories were briefly knocked offline after Guilmette called 8chan’s anti-DDoS provider and convinced them to stop protecting the site from crippling online attacks (8Chan is now protected by an anti-DDoS provider in St. Petersburg, Russia).

The public face of 8chan is Jim Watkins, a pig farmer in the Philippines who many experts believe is also the person behind the shadowy persona of “Q” at the center of the conspiracy theory movement.

Watkin owns and operates a Reno, Nev.-based hosting firm called N.T. Technology Inc. That company has a legal contract with the American Registry for Internet Numbers (ARIN), the non-profit which administers IP addresses for entities based in North America.

ARIN’s contract with N.T. Technology gives the latter the right to use more than 21,500 IP addresses. But as Guilmette discovered recently, N.T. Technology is listed in Nevada Secretary of State records as under an “administrative hold,” which according to Nevada statute is a “terminated” status indicator meaning the company no longer has the right to transact business in the state.

N.T. Technology’s listing in the Nevada Secretary of State records. Click to Enlarge.

The same is true for Centauri Communications, a Freemont, Calif.-based Internet Service Provider that serves as N.T. Technology’s colocation provider and sole connection to the larger Internet. Centauri was granted more than 4,000 IPv4 addresses by ARIN more than a decade ago.

According to the California Secretary of State, Centauri’s status as a business in the state is “suspended.” It appears that Centauri hasn’t filed any business records with the state since 2009, and the state subsequently suspended the company’s license to do business in Aug. 2012. Separately, the California State Franchise Tax Board (FTB) suspended this company as of April 1, 2014.

Centauri Communications’ listing with the California Secretary of State’s office.

Neither Centauri Communications nor N.T. Technology responded to repeated requests for comment.

KrebsOnSecurity shared Guilmette’s findings with ARIN, which said it would investigate the matter.

“ARIN has received a fraud report from you and is evaluating it,” a spokesperson for ARIN said. “We do not comment on such reports publicly.”

Guilmette said apart from reclaiming the Internet address space from Centauri and NT Technology, ARIN could simply remove each company’s listings from the global WHOIS routing records. Such a move, he said, would likely result in most ISPs blocking access to those IP addresses.

“If ARIN were to remove these records from the WHOIS database, it would serve to de-legitimize the use of these IP blocks by the parties involved,” he said. “And globally, it would make it more difficult for the parties to find people willing to route packets to and from those blocks of addresses.”

QAnon/8Chan Sites Briefly Knocked Offline

A phone call to an Internet provider in Oregon on Sunday evening was all it took to briefly sideline multiple websites related to 8chan/8kun — a controversial online image board linked to several mass shootings — and QAnon, the far-right conspiracy theory which holds that a cabal of Satanic pedophiles is running a global child sex-trafficking ring and plotting against President Donald Trump. Following a brief disruption, the sites have come back online with the help of an Internet company based in St. Petersburg, Russia.

The IP address range in the upper-right portion of this map of QAnon and 8kun-related sites — 203.28.246.0/24 — is assigned to VanwaTech and briefly went offline this evening. Source: twitter.com/Redrum_of_Crows.

A large number of 8kun and QAnon-related sites (see map above) are connected to the Web via a single Internet provider in Vancouver, Wash. called VanwaTech (a.k.a. “OrcaTech“). Previous appeals to VanwaTech to disconnect these sites have fallen on deaf ears, as the company’s owner Nick Lim reportedly has been working with 8kun’s administrators to keep the sites online in the name of protecting free speech.

But VanwaTech also had a single point of failure on its end: The swath of Internet addresses serving the various 8kun/QAnon sites were being protected from otherwise crippling and incessant distributed-denial-of-service (DDoS) attacks by Hillsboro, Ore. based CNServers LLC.

On Sunday evening, security researcher Ron Guilmette placed a phone call to CNServers’ owner, who professed to be shocked by revelations that his company was helping QAnon and 8kun keep the lights on.

Within minutes of that call, CNServers told its customer — Spartan Host Ltd., which is registered in Belfast, Northern Ireland — that it would no longer be providing DDoS protection for the set of 254 Internet addresses that Spartan Host was routing on behalf of VanwaTech.

Contacted by KrebsOnSecurity, the person who answered the phone at CNServers asked not to be named in this story for fear of possible reprisals from the 8kun/QAnon crowd. But they confirmed that CNServers had indeed terminated its service with Spartan Host. That person added they weren’t a fan of either 8kun or QAnon, and said they would not self-describe as a Trump supporter.

CNServers said that shortly after it withdrew its DDoS protection services, Spartan Host changed its settings so that VanwaTech’s Internet addresses were protected from attacks by ddos-guard[.]net, a company based in St. Petersburg, Russia.

Spartan Host’s founder, 25-year-old Ryan McCully, confirmed CNServers’ report. McCully declined to say for how long VanwaTech had been a customer, or whether Spartan Host had experienced any attacks as a result of CNServers’ action.

McCully said while he personally doesn’t subscribe to the beliefs espoused by QAnon or 8kun, he intends to keep VanwaTech as a customer going forward.

“We follow the ‘law of the land’ when deciding what we allow to be hosted with us, with some exceptions to things that may cause resource issues etc.,” McCully said in a conversation over instant message. “Just because we host something, it doesn’t say anything about we do and don’t support, our opinions don’t come into hosted content decisions.”

But according to Guilmette, Spartan Host’s relationship with VanwaTech wasn’t widely known previously because Spartan Host had set up what’s known as a “private peering” agreement with VanwaTech. That is to say, the two companies had a confidential business arrangement by which their mutual connections were not explicitly stated or obvious to other Internet providers on the global Internet.

Guilmette said private peering relationships often play a significant role in a good deal of behind-the-scenes-mischief when the parties involved do not want anyone else to know about their relationship.

“These arrangements are business agreements that are confidential between two parties, and no one knows about them, unless you start asking questions,” Guilmette said. “It certainly appears that a private peering arrangement was used in this instance in order to hide the direct involvement of Spartan Host in providing connectivity to VanwaTech and thus to 8kun. Perhaps Mr. McCully was not eager to have his involvement known.”

8chan, which rebranded last year as 8kun, has been linked to white supremacism, neo-Nazism, antisemitism, multiple mass shootings, and is known for hosting child pornography. After three mass shootings in 2019 revealed the perpetrators had spread their manifestos on 8chan and even streamed their killings live there, 8chan was ostracized by one Internet provider after another.

The FBI last year identified QAnon as a potential domestic terror threat, noting that some of its followers have been linked to violent incidents motivated by fringe beliefs.

Further reading:

What Is QAnon?

QAnon: A Timeline of Violent Linked to the Conspiracy Theory

Report: U.S. Cyber Command Behind Trickbot Tricks

A week ago, KrebsOnSecurity broke the news that someone was attempting to disrupt the Trickbot botnet, a malware crime machine that has infected millions of computers and is often used to spread ransomware. A new report Friday says the coordinated attack was part of an operation carried out by the U.S. military’s Cyber Command.

Image: Shutterstock.

On October 2, KrebsOnSecurity reported that twice in the preceding ten days, an unknown entity that had inside access to the Trickbot botnet sent all infected systems a command telling them to disconnect themselves from the Internet servers the Trickbot overlords used to control compromised Microsoft Windows computers.

On top of that, someone had stuffed millions of bogus records about new victims into the Trickbot database — apparently to confuse or stymie the botnet’s operators.

In a story published Oct. 9, The Washington Post reported that four U.S. officials who spoke on condition of anonymity said the Trickbot disruption was the work of U.S. Cyber Command, a branch of the Department of Defense headed by the director of the National Security Agency (NSA).

The Post report suggested the action was a bid to prevent Trickbot from being used to somehow interfere with the upcoming presidential election, noting that Cyber Command was instrumental in disrupting the Internet access of Russian online troll farms during the 2018 midterm elections.

The Post said U.S. officials recognized their operation would not permanently dismantle Trickbot, describing it rather as “one way to distract them for at least a while as they seek to restore their operations.”

Alex Holden, chief information security officer and president of Milwaukee-based Hold Security, has been monitoring Trickbot activity before and after the 10-day operation. Holden said while the attack on Trickbot appears to have cut its operators off from a large number of victim computers, the bad guys still have passwords, financial data and reams of other sensitive information stolen from more than 2.7 million systems around the world.

Holden said the Trickbot operators have begun rebuilding their botnet, and continue to engage in deploying ransomware at new targets.

“They are running normally and their ransomware operations are pretty much back in full swing,” Holden said. “They are not slowing down because they still have a great deal of stolen data.”

Holden added that since news of the disruption first broke a week ago, the Russian-speaking cybercriminals behind Trickbot have been discussing how to recoup their losses, and have been toying with the idea of massively increasing the amount of money demanded from future ransomware victims.

“There is a conversation happening in the back channels,” Holden said. “Normally, they will ask for [a ransom amount] that is something like 10 percent of the victim company’s annual revenues. Now, some of the guys involved are talking about increasing that to 100 percent or 150 percent.”

Promising Infusions of Cash, Fake Investor John Bernard Walked Away With $30M

September featured two stories on a phony tech investor named John Bernard, a pseudonym used by a convicted thief named John Clifton Davies who’s fleeced dozens of technology companies out of an estimated $30 million with the promise of lucrative investments. Those stories prompted a flood of tips from Davies’ victims that paints a much clearer picture of this serial con man and his cohorts, including allegations of hacking, smuggling, bank fraud and murder.

KrebsOnSecurity interviewed more than a dozen of Davies’ victims over the past five years, none of whom wished to be quoted here out of fear of reprisals from a man they say runs with mercenaries and has connections to organized crime.

As described in Part II of this series, John Bernard is in fact John Clifton Davies, a 59-year-old U.K. citizen who absconded from justice before being convicted on multiple counts of fraud in 2015. Prior to his conviction, Davies served 16 months in jail before being cleared of murdering his third wife on their honeymoon in India.

The scam artist John Bernard (left) in a recent Zoom call, and a photo of John Clifton Davies from 2015.

After eluding justice in the U.K., Davies reinvented himself as The Private Office of John Bernard, pretending to a be billionaire Swiss investor who made his fortunes in the dot-com boom 20 years ago and who was seeking investment opportunities.

In case after case, Bernard would promise to invest millions in tech startups, and then insist that companies pay tens of thousands of dollars worth of due diligence fees up front. However, the due diligence company he insisted on using — another Swiss firm called Inside Knowledge — also was secretly owned by Bernard, who would invariably pull out of the deal after receiving the due diligence money.

Bernard found a constant stream of new marks by offering extraordinarily generous finders fees to investment brokers who could introduce him to companies seeking an infusion of cash. When it came time for companies to sign legal documents, Bernard’s victims interacted with a 40-something Inside Knowledge employee named “Katherine Miller,” who claimed to be his lawyer.

It turns out that Katherine Miller is a onetime Moldovan attorney who was previously known as Ecaterina “Katya” Dudorenko. She is listed as a Romanian lawyer in the U.K. Companies House records for several companies tied to John Bernard, including Inside Knowledge Solutions Ltd., Docklands Enterprise Ltd., and Secure Swiss Data Ltd (more on Secure Swiss data in a moment).

Another of Bernard’s associates listed as a director at Docklands Enterprise Ltd. is Sergey Valentinov Pankov. This is notable because in 2018, Pankov and Dudorenko were convicted of cigarette smuggling in the United Kingdom.

Sergey Pankov and Ecaterina Dudorenco, in undated photos. Source: Mynewsdesk.com

According to the Organized Crime and Corruption Reporting Project, “illicit trafficking of tobacco is a multibillion-dollar business today, fueling organized crime and corruption [and] robbing governments of needed tax money. So profitable is the trade that tobacco is the world’s most widely smuggled legal substance. This booming business now stretches from counterfeiters in China and renegade factories in Russia to Indian reservations in New York and warlords in Pakistan and North Africa.”

Like their erstwhile boss Mr. Davies, both Pankov and Dudorenko disappeared before their convictions in the U.K. They were sentenced in absentia to two and a half years in prison.

Incidentally, Davies was detained by Ukrainian authorities in 2018, although he is not mentioned by name in this story from the Ukrainian daily Pravda. The story notes that the suspect moved to Kiev in 2014 and lived in a rented apartment with his Ukrainian wife.

John’s fourth wife, Iryna Davies, is listed as a director of one of the insolvency consulting businesses in the U.K. that was part of John Davies’ 2015 fraud conviction. Pravda reported that in order to confuse the Ukrainian police and hide from them, Mr. Davies constantly changed their place of residence.

John Clifton Davies, a.k.a. John Bernard. Image: Ukrainian National Police.

The Pravda story says Ukrainian authorities were working with the U.K. government to secure Davies’ extradition, but he appears to have slipped away once again. That’s according to one investment broker who’s been tracking Davies’ trail of fraud since 2015.

According to that source — who we’ll call “Ben” — Inside Knowledge and The Private Office of John Bernard have fleeced dozens of companies out of nearly USD $30 million in due diligence fees over the years, with one company reportedly paying over $1 million.

Ben said he figured out that Bernard was Davies through a random occurrence. Ben said he’d been told by a reliable source that Bernard traveled everywhere in Kiev with several armed guards, and that his entourage rode in a convoy that escorted Davies’ high-end Bentley. Ben said Davies’ crew was even able to stop traffic in the downtown area in what was described as a quasi military maneuver so that Davies’ vehicle could proceed unobstructed (and presumably without someone following his car).

Ben said he’s spoken to several victims of Bernard who saw phony invoices for payments to be made to banks in Eastern Europe appear to come from people within their own organization shortly after cutting off contact with Bernard and his team.

While Ben allowed that these invoices could have come from another source, it’s worth noting that by virtue of participating in the due diligence process, the companies targeted by these schemes would have already given Bernard’s office detailed information about their finances, bank accounts and security processes.

In some cases, the victims had agreed to use Bernard’s Secure Swiss Data software and services to store documents for the due diligence process. Secure Swiss Data is one of several firms founded by Davies/Inside Knowledge and run by Dudorenko, and it advertised itself as a Swiss company that provides encrypted email and data storage services. In February 2020, Secure Swiss Data was purchased in an “undisclosed multimillion buyout” by SafeSwiss Secure Communication AG.

Shortly after the first story on John Bernard was published here, virtually all of the employee profiles tied to Bernard’s office removed him from their work experience as listed on their LinkedIn resumes — or else deleted their profiles altogether. Also, John Bernard’s main website — the-private-office.ch — replaced the content on its homepage with a note saying it was closing up shop.

Incredibly, even after the first two stories ran, Bernard/Davies and his crew continued to ply their scam with companies that had already agreed to make due diligence payments, or that had made one or all of several installment payments.

One of those firms actually issued a press release in August saying it had been promised an infusion of millions in cash from John Bernard’s Private Office. They declined to be quoted here, and continue to hold onto hope that Mr. Bernard is not the crook that he plainly is.

Who is Tech Investor John Bernard?

John Bernard, the subject of a story here last week about a self-proclaimed millionaire investor who has bilked countless tech startups, appears to be a pseudonym for John Clifton Davies, a U.K. man who absconded from justice before being convicted on multiple counts of fraud in 2015. Prior to his conviction, Davies served 16 months in jail before being cleared of murdering his wife on their honeymoon in India.

The Private Office of John Bernard, which advertises itself as a capital investment firm based in Switzerland, has for years been listed on multiple investment sites as the home of a millionaire who made his fortunes in the dot-com boom 20 years ago and who has oodles of cash to invest in tech startups.

But as last week’s story noted, Bernard’s investment company is a bit like a bad slot machine that never pays out. KrebsOnSecurity interviewed multiple investment brokers who all told the same story: After promising to invest millions after one or two phone calls and with little or no pushback, Bernard would insist that companies pay tens of thousands of dollars worth of due diligence fees up front.

However, the due diligence company he insisted on using — another Swiss firm called Inside Knowledge — also was secretly owned by Bernard, who would invariably pull out of the deal after receiving the due diligence money.

Neither Mr. Bernard nor anyone from his various companies responded to multiple requests for comment over the past few weeks. What’s more, virtually all of the employee profiles tied to Bernard’s office have since last week removed those firms from their work experience as listed on their LinkedIn resumes — or else deleted their profiles altogether.

Sometime on Thursday John Bernard’s main website — the-private-office.ch — replaced the content on its homepage with a note saying it was closing up shop.

“We are pleased to announce that we are currently closing The Private Office fund as we have reached our intended investment level and that we now plan to focus on helping those companies we have invested into to grow and succeed,” the message reads.

As noted in last week’s story, the beauty of a scam like the one multiple investment brokers said was being run by Mr. Bernard is that companies bilked by small-time investment schemes rarely pursue legal action, mainly because the legal fees involved can quickly surpass the losses. What’s more, most victims will likely be too ashamed to come forward.

Also, John Bernard’s office typically did not reach out to investment brokers directly. Rather, he had his firm included on a list of angel investors focused on technology companies, so those seeking investments usually came to him.

Finally, multiple sources interviewed for this story said Bernard’s office offered a finders fee for any investment leads that brokers brought his way. While such commissions are not unusual, the amount promised — five percent of the total investment in a given firm that signed an agreement — is extremely generous. However, none of the investment brokers who spoke to KrebsOnSecurity were able to collect those fees, because Bernard’s office never actually consummated any of the deals they referred to him.

PAY NO ATTENTION TO THE EMPTY BOOKSHELVES

After last week’s story ran, KrebsOnSecurity heard from a number of other investment brokers who had near identical experiences with Bernard. Several said they at one point spoke with him via phone or Zoom conference calls, and that he had a distinctive British accent.

When questioned about why his staff was virtually all based in Ukraine when his companies were supposedly in Switzerland, Bernard replied that his wife was Ukrainian and that they were living there to be closer to her family.

One investment broker who recently got into a deal with Bernard shared a screen shot from a recent Zoom call with him. That screen shot shows Bernard bears a striking resemblance to one John Clifton Davies, a 59-year-old from Milton Keynes, a large town in Buckinghamshire, England about 50 miles (80 km) northwest of London.

John Bernard (left) in a recent Zoom call, and a photo of John Clifton Davies from 2015.

In 2015, Mr. Davies was convicted of stealing more than GBP 750,000 from struggling companies looking to restructure their debt. For at least seven years, Davies ran multiple scam businesses that claimed to provide insolvency consulting to distressed companies, even though he was not licensed to do so.

“After gaining the firm’s trust, he took control of their assets and would later pocket the cash intended for creditors,” according to a U.K. news report from 2015. “After snatching the cash, Davies proceeded to spend the stolen money on a life of luxury, purchasing a new upmarket home fitted with a high-tech cinema system and new kitchen.”

Davies disappeared before he was convicted of fraud in 2015. Two years before that, Davies was released from prison after being held in custody for 16 months on suspicion of murdering his new bride in 2004 on their honeymoon in India.

Davies’ former wife Colette Davies, 39, died after falling 80 feet from a viewing point at a steep gorge in the Himachal Pradesh region of India. Mr. Davies was charged with murder and fraud after he attempted to collect GBP 132,000 in her life insurance payout, but British prosecutors ultimately conceded they did not have enough evidence to convict him.

THE SWISS AND UKRAINE CONNECTIONS

While the photos above are similar, there are other clues that suggest the two identities may be the same person. A review of business records tied to Davies’ phony insolvency consulting businesses between 2007 and 2013 provides some additional pointers.

John Clifton Davies’ former listing at the official U.K. business registrar Companies House show his company was registered at the address 26 Dean Forest Way, Broughton, Milton Keynes.

A search on that street address at 4iq.com turns up several interesting results, including a listing for senecaequities.com registered to a John Davies at the email address john888@myswissmail.ch.

A Companies House official record for Seneca Equities puts it at John Davies’ old U.K. address at 26 Dean Forest Way and lists 46-year-old Iryna Davies as a director. “Iryna” is a uniquely Ukrainian spelling of the name Irene (the Russian equivalent is typically “Irina”).

A search on John Clifton Davies and Iryna turned up this 2013 story from The Daily Mirror which says Iryna is John C. Davies’ fourth wife, and that the two were married in 2010.

KrebsOnSecurity sought comment from both the U.K. police district that prosecuted Davies’ case and the U.K.’s National Crime Agency (NCA). Neither wished to comment on the findings. “We can neither confirm nor deny the existence of an investigation or subjects of interest,” a spokesperson for the NCA said.

Two Russians Charged in $17M Cryptocurrency Phishing Spree

U.S. authorities today announced criminal charges and financial sanctions against two Russian men accused of stealing nearly $17 million worth of virtual currencies in a series of phishing attacks throughout 2017 and 2018 that spoofed websites for some of the most popular cryptocurrency exchanges.


The Justice Department unsealed indictments against Russian nationals Danil Potekhin and Dmitirii Karasavidi, alleging the duo was responsible for a sophisticated phishing and money laundering campaign that resulted in the theft of $16.8 million in cryptocurrencies and fiat money from victims.

Separately, the U.S. Treasury Department announced economic sanctions against Potekhin and Karasavidi, effectively freezing all property and interests of these persons (subject to U.S. jurisdiction) and making it a crime to transact with them.

According to the indictments, the two men set up fake websites that spoofed login pages for the currency exchanges Binance, Gemini and Poloniex. Armed with stolen login credentials, the men allegedly stole more than $10 million from 142 Binance victims, $5.24 million from 158 Poloniex users, and $1.17 million from 42 Gemini customers.

Prosecutors say the men then laundered the stolen funds through an array of intermediary cryptocurrency accounts — including compromised and fictitiously created accounts — on the targeted cryptocurrency exchange platforms. In addition, the two are alleged to have artificially inflated the value of their ill-gotten gains by engaging in cryptocurrency price manipulation using some of the stolen funds.

For example, investigators alleged Potekhin and Karasavidi used compromised Poloniex accounts to place orders to purchase large volumes of “GAS,” the digital currency token used to pay the cost of executing transactions on the NEO blockchain — China’s first open source blockchain platform.

“Using digital crurency in one victim Poloniex account, they placed an order to purchase approximately 8,000 GAS, thereby immediately increasing the market price of GAS from approximately $18 to $2,400,” the indictment explains.

Potekhin and others then converted the artificially inflated GAS in their own fictitious Poloniex accounts into other cryptocurrencies, including Ethereum (ETH) and Bitcoin (BTC). From the complaint:

“Before the Eight Fictitious Poloniex Accounts were frozen, POTEKHIN and others transferred approximately 759 ETH to nine digital currency addresses. Through a sophisticated and layered manner, the ETH from these nine digital currency addresses was sent through multiple intermediary accounts, before ultimately being deposited into a Bitfinex account controlled by Karasavidi.”

The Treasury’s action today lists several of the cryptocurrency accounts thought to have been used by the defendants. Searching on some of those accounts at various cryptocurrency transaction tracking sites points to a number of phishing victims.

“I would like to blow your bitch ass away, if you even had the balls to show yourself,” exclaimed one victim, posting in a comment on the Etherscan lookup service.

One victim said he contemplated suicide after being robbed of his ETH holdings in a 2017 phishing attack. Another said he’d been relieved of funds needed to pay for his 3-year-old daughter’s medical treatment.

“You and your team will leave a trail and will be found,” wrote one victim, using the handle ‘Illfindyou.’ “You’ll only be able to hide behind the facade for a short while. Go steal from whales you piece of shit.”

There is potentially some good news for victims of these phishing attacks. According to the Treasury Department, millions of dollars in virtual currency and U.S. dollars traced to Karasavidi’s account was seized in a forfeiture action by the United States Secret Service.

Whether any of those funds can be returned to victims of this phishing spree remains to be seen. And assuming that does happen, it could take years. In February 2020, KrebsOnSecurity wrote about being contacted by an Internal Revenue Service investigator seeking to return funds seized seven years earlier as part of the governments 2013 seizure of Liberty Reserve, a virtual currency service that acted as a $6 billion hub for the cybercrime world.

Today’s action is the latest indication that the Treasury Department is increasingly willing to use its authority to restrict the financial resources tied to various cybercrime activities. Earlier this month, the agency’s Office of Foreign Asset Control (OFAC) added three Russian nationals and a host of cryptocurrency addresses to its sanctions lists in a case involving efforts by Russian online troll farms to influence the 2018 mid-term elections.

In June, OFAC took action against six Nigerian nationals suspected of stealing $6 million from U.S. businesses and individuals through Business Email Compromise fraud and romance scams.

And in 2019, OFAC sanctioned 17 members allegedly associated with “Evil Corp.,” an Eastern European cybercrime syndicate that has stolen more than $100 million from small businesses via malicious software over the past decade.

A copy of the indictments against Potekhin and Karasavidi is available here (PDF).

Porn Clip Disrupts Virtual Court Hearing for Alleged Twitter Hacker

Perhaps fittingly, a Web-streamed court hearing for the 17-year-old alleged mastermind of the July 15 mass hack against Twitter was cut short this morning after mischief makers injected a pornographic video clip into the proceeding.

17-year-old Graham Clark of Tampa, Fla. was among those charged in the July 15 Twitter hack. Image: Hillsborough County Sheriff’s Office.

The incident occurred at a bond hearing held via the videoconferencing service Zoom by the Hillsborough County, Fla. criminal court in the case of Graham Clark. The 17-year-old from Tampa was arrested earlier this month on suspicion of social engineering his way into Twitter’s internal computer systems and tweeting out a bitcoin scam through the accounts of high-profile Twitter users.

Notice of the hearing was available via public records filed with the Florida state attorney’s office. The notice specified the Zoom meeting time and ID number, essentially allowing anyone to participate in the proceeding.

Even before the hearing officially began it was clear that the event would likely be “zoom bombed.” That’s because while participants were muted by default, they were free to unmute their microphones and transmit their own video streams to the channel.

Sure enough, less than a minute had passed before one attendee not party to the case interrupted a discussion between Clark’s attorney and the judge by streaming a live video of himself adjusting his face mask. Just a few minutes later, someone began interjecting loud music.

It became clear that presiding Judge Christopher C. Nash was personally in charge of administering the video hearing when, after roughly 15 seconds worth of random chatter interrupted the prosecution’s response, Nash told participants he was removing the troublemakers as quickly as he could.

Judge Nash, visibly annoyed immediately after one of the many disruptions to today’s hearing.

What transpired a minute later was almost inevitable given the permissive settings of this particular Zoom conference call: Someone streamed a graphic video clip from Pornhub for approximately 15 seconds before Judge Nash abruptly terminated the broadcast.

With the ongoing pestilence that is the COVID-19 pandemic, the nation’s state and federal courts have largely been forced to conduct proceedings remotely via videoconferencing services. While Zoom and others do offer settings that can prevent participants from injecting their own audio and video into the stream unless invited to do so, those settings evidently were not enabled in today’s meeting.

At issue before the court today was a defense motion to modify the amount of the defendant’s bond, which has been set at $750,000. The prosecution had argued that Clark should be required to show that any funds used toward securing that bond were gained lawfully, and were not merely the proceeds from his alleged participation in the Twitter bitcoin scam or some other form of cybercrime.

Florida State Attorney Andrew Warren’s reaction as a Pornhub clip began streaming to everyone in today’s Zoom proceeding.

Mr. Clark’s attorneys disagreed, and spent most of the uninterrupted time in today’s hearing explaining why their client could safely be released under a much smaller bond and close supervision restrictions.

On Sunday, The New York Times published an in-depth look into Clark’s wayward path from a small-time cheater and hustler in online games like Minecraft to big-boy schemes involving SIM swapping, a form of fraud that involves social engineering employees at mobile phone companies to gain control over a target’s phone number and any financial, email and social media accounts associated with that number.

According to The Times, Clark was suspected of being involved in a 2019 SIM swapping incident which led to the theft of 164 bitcoins from Gregg Bennett, a tech investor in the Seattle area. That theft would have been worth around $856,000 at the time; these days 164 bitcoins is worth approximately $1.8 million.

The Times said that soon after the theft, Bennett received an extortion note signed by Scrim, one of the hacker handles alleged to have been used by Clark. From that story:

“We just want the remainder of the funds in the Bittrex,” Scrim wrote, referring to the Bitcoin exchange from which the coins had been taken. “We are always one step ahead and this is your easiest option.”

In April, the Secret Service seized 100 Bitcoins from Mr. Clark, according to government forfeiture documents. A few weeks later, Mr. Bennett received a letter from the Secret Service saying they had recovered 100 of his Bitcoins, citing the same code that was assigned to the coins seized from Mr. Clark.

Florida prosecutor Darrell Dirks was in the middle of explaining to the judge that investigators are still in the process of discovering the extent of Clark’s alleged illegal hacking activities since the Secret Service returned the 100 bitcoin when the porn clip was injected into the Zoom conference.

Ultimately, Judge Nash decided to keep the bond amount as is, but to remove the condition that Clark prove the source of the funds.

Clark has been charged with 30 felony counts and is being tried as an adult. Federal prosecutors also have charged two other young men suspected of playing roles in the Twitter hack, including a 22-year-old from Orlando, Fla. and a 19-year-old from the United Kingdom.