By Kevin Poulsen
May 27, 2008
A California man has been indicted for an inventive scheme that
allegedly siphoned $50,000 from online brokerage houses E-trade and
Schwab.com in six months -- a few pennies at a time.
Michael Largent, of Plumas Lake, California, allegedly exploited a
loophole in a common procedure both companies follow when a customer
links his brokerage account to a bank account for the first time. To
verify that the account number and routing information is correct, the
brokerages automatically send small "micro-deposits" of between two
cents to one dollar to the account, and ask the customer to verify that
they've received it.
Largent allegedly used an automated script to open 58,000 online
brokerage accounts, linking each of them to a handful of online bank
accounts, and accumulating thousands of dollars in micro-deposits.
I know it's only May, but I think the competition for Threat Level's
Caper of the Year award is over.
Largent's script allegedly used fake names, addresses and Social
Security numbers for the brokerage accounts. Largent allegedly favored
cartoon characters for the names, including Johnny Blaze, King of the
Hill patriarch Hank Hill, and Rusty Shackelford. That last name is
doubly-fake -- it's the alias commonly used by the paranoid exterminator
Dale Gribble on King of the Hill.
The banks involved included Capital One, Metabank, Greendot and
Skylight. Largent allegedly cashed out by channeling the money into
pre-paid debit cards.
A May 7 Secret Service search warrant affidavit (.pdf)  says Largent
tried the same thing with Google's Checkout service, accumulating
$8,225.29 in eight different bank accounts at Bancorp Bank.
When the bank asked Largent about the thousands of small transfers, he
told them that he'd read Google's terms of service, and that it didn't
prohibit multiple e-mail addresses and accounts. "He stated he needed
the money to pay off debts and stated that this was one way to earn
money, by setting up multiple accounts having Google submit the two
The Google caper is not charged in the indictment. (.pdf) 
According to the government, Largent was undone by the USA Patriot Act's
requirement that financial firms verify the identity of their customers.
Schwab.com was notified in January that more than 5,000 online accounts
had been opened with bogus information. When the Secret Service
investigated, they found some 11,385 Schwab accounts were opened under
the name "Speed Apex" from the same five IP addresses, all of them
tracing back to Largent's internet service from AT&T.
Largent is free on bail. He's charged in federal court in Sacramento
with four counts each of computer fraud, wire fraud and mail fraud. He
didn't return repeated phone calls Tuesday; Representatives of E-trade,
Schwab.com and Google also didn't return phone calls.
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