A fake takeover bid for Avon was filed with the SEC, causing a stir in the market and a sharp rise in Avon’s shares. At the same time, it highlights the possibility that the filing system used by Wall Street is not that secure after all.
Thirty minutes before noon last Thursday, a regulatory filing appeared on the website of Securities and Exchange Commission detailing an offer from one PTG Capital Partners to buy Avon for USD 18.75 per share.
The filing caused such a stir that within several minutes, news wire services have reported on it. But when the dust settled down after noon, it turned out that the information stated in the regulatory filing is not accurate, leading some to conclude that it might be a hoax. The supposed British company and its legal representative in the US cannot be reached as well.
Avon has been rumored to be sold for some years now so this surprising filing is not entirely out of the blue. But when Avon finally stated its side, it was to deny that a buyout offer has been made for them.
Eventually, it proved to be a fake buyout bid. Throughout the day though, USD 91 million worth of stocks from Avon has been bought/sold and its stock price increased by almost USD 1.
Now, SEC officials have yet to confirm who made the fraudulent filing and if there was a clear intent at market manipulation. At any rate, concerns about the integrity of the Edgar database — a system used by companies and financial managers who are involved in public trading to make filings — are rising.
Apparently, companies make routine filings to the Edgar database — totaling around 4000 filings every day — all of which is made public at once. This is why it took some time to verify the offer. Moreover, in a bid to encourage companies to have consistent disclosure, third party filing is allowed in the Edgar system. This means that any insider, stockholder or fraudster could file to Hass and Associates Accounting’s cache, for instance, even without credentials to officially file on its behalf.
It is unclear exactly how the agency verifies the filed information. According to SEC, “Under the federal securities laws, filers are responsible for the truthfulness of their filings, and they are subject to enforcement actions when they are false or misleading.”
What’s more, this does not seem to be the first time that Edgar database has been misused: In 2012, a false bid to buy Rocky Mountain Chocolate Factory was made by a supposed British firm called PST Capital Partners through the Edgar system.
Hass and Associates Accounting noted that an important takeaway from this incident could be the breaking of the belief that being in Edgar is equivalent to a stamp of approval from the SEC.
Reports say tax fraud victims have lost around US$15 million to cybercriminals since 2013.
Fraudsters may come in many forms:
- They can pretend to be an Internal Revenue Service (IRS) agent, who tricked their victims into paying thousands of dollars each through phone calls. Call recipients were threatened to pay up or get charged.
- Some often used malware such as Trojan spyware, banking Trojans or remote access tools (RTAs) to gain access to potential victims’ computers or bank accounts.
- And the brazen ones present themselves as IRS agents and show up in your front door.
Over the years, the attackers’ means may have evolved but their goal remains the same, and that is to deceive victims into giving out their personal information, including Social Security numbers, banking information and other private details.
Tax-related identity theft occurs when attackers uses your stolen Social Security number to file a fraudulent tax return early in the year. You may be unaware that you are already a victim until you try to file your taxes and discover that a return has been filed using your number.
Professionals from Hass and Associates Accounting advise people to keep and protect their Social Security number and other financial information, provide it only when it’s required. Don’t just hand it over because someone asks for it.
Given in the following are examples of tax fraud with tips on how to avoid them.
1. Phone fraud
One example of a phone fraud goes something like this: Someone claims to an IRS agent calls you with bad news. He/she will say that you owe the government unpaid tax money and if you don’t pay immediately over the phone with a credit or debit card; you’ll be audited, arrested or even deported.
If you receive that kind of phone call then it’s a big lie. IRS media spokesperson, Patricia Svarnas said that’s not how IRS does business. They would never ask for your debit or credit card number, and they don’t threaten you with audits, jail time, or deportation.
Phishing is the fraudulent practice of sending emails claiming to be from reputable agencies or companies like IRS in order to induce individuals to reveal personal information, such as passwords, credit card numbers, and Social Security number, online.
These emails often include a link to a website that looks very similar to an official IRS site. You should not open attachments or click on clicks contained in these messages.
Svarnas said that never respond anything you receive through email. IRS does not initiate contact with taxpayers by email requesting their personal or financial information, including any kind of electronic communication, such as text messages.
3. Tax preparer fraud
Some fraudulent tax preparer who claims to be a tax professional will ask taxpayers to have their refund deposited into the preparer’s checking account.
The IRS advises taxpayers to be very careful when choosing a tax preparer, not someone who recently jumped into the tax filling business to make fast money. If a tax preparer is not associated with a nonprofit or commercial service, make sure they are approved by the IRS.
The mobile OS-maker Cyanogen has just raised USD 80 million in its Series C funding round with backing from Twitter, Rupert Murdoch and Qualcomm, making its goal of taking Android from Google all the more possible.
The people behind Cyanogen have consistently expressed their vision to make Android a more “open” ecosystem and OS. “We’re committed to creating an open computing platform that fundamentally empowers the entire mobile ecosystem from developers to hardware makers, and most importantly, consumers around the world. We’re excited to have the backing of an amazingly diverse group of strategic investors who are supporting us in building a truly open Android,” said Kirt McMaster, Cyanogen’s CEO.
Other notable investors in the most recent round include Telefonica, Access Industries, Smartfren Telecom, Vivi Nevo and Index Ventures. In Cyanogen’s previous funding rounds, they got USD 30 million from Tencent, Redpoint Ventures, Benchmark and Andreessen Horowitz. This particular round which left the startup with a total of USD 110 million was led by India’s Azim Premji PremjiInvest, as reported by Hass and Associates Accounting.
Horowitz’s partner, Peter Levine, who invested in the second round of funding said, “App and chip vendors are very worried about Google controlling the entire experience.” He also admitted that at first he did not think “a startup could come in and create a new OS”.
A number of other tech giants have already tried to crack a shot at the mobile OS market such as Samsung, Microsoft, Nokia, Blackberry, Intel, Palm and Mozilla. McMaster admitted he’s well aware of the big risk and that’s precisely why he thinks using Android is the only way to effectively take on Google. By making available to the public the code of Cyanogen, he’s expecting to gain support from app developers who wants to have another option aside from the limited ones currently provided by Google and Apple. For instance, a payment solutions provider could create a highly customized payment system that can work better than Apple Pay or Google Wallet.
Sandesh Patnam of Premji Invest said, “We invested in Cyanogen because we’re big proponents of what they’re doing in opening up Android and supporting global and local ecosystem players. Cyanogen is well-positioned to become the third leading mobile OS, and we’re excited to back them in growing their business on a global scale.”
Formed 6 years ago as CyanogenMod Project, it started with 40-year old programmer Steve Kondik tinkering with Android code to maximize its performance. Soon enough, online forums have started to pick up on his customizable version which led to other programmers joining him. Hass and Associates Accounting’s report says that as early as 2011, a million mobile phones have Cyanogen installed in it.
To date, around 50 million handsets are running Cyanogen, most of those underwent flashing and rebooting. Considering that one has to take time and effort in erasing the current OS of the phone before installing Cyanogen, it’s not a stretch to say that there is indeed a demand for a highly-customizable OS.
If you’re a hacker planning to launch a campaign against unsuspecting internet users, when would be the best time for you to get the maximum results? That’s right, the holiday season.
Just by reading the tech news every day, it is enough to scare any sensible person from using the internet in conducting business. In fact, most people seem to be too accustomed already to such security threats that it almost sounds like they’re resigned to the fact that becoming a victim is unavoidable.
So before you continue your ‘convenient’ online shopping this holiday season, read on for reasons why you should use your credit card instead of your debit cards from Hass and Associates Accounting.
Credit card is obviously the better choice when it comes to cashless shopping. Aside from having better security on your data, it is also relatively easier to dispute charges made on a it compared to debit card. On the surface, both can protect you from bogus charges, however, the critical difference is this: charges to a debit card readily removes money from your bank account while those made on a credit card can still be disputed before any fund gets removed.
Moreover, according to the Fair Credit Billing Act in the US, credit-card users should be protected against failure to deliver services or products agreed upon. This means that if an online seller failed to deliver, the buyer can still ask for a refund or a chargeback from the card company. On the other hand, using a debit card is not covered by this federal law as it effectively means that you have authorized your bank to release money even though the goods did not reach you.
As reported by Hass and Associates Accounting, many credit card companies are now providing purchase-protection policies, albeit limited ones, in order to cover damage or theft. For instance, you may avail of a policy that covers loss or damage 100 days after your purchase but only insured up to USD 500.
From the very moment that people started using money, perhaps, some have uncovered ways of stealing it. And so, as sure as there will still be money after 25 years — or in some other form — corporate fraudsters will still be plying their trade. But innovative technologies could produce an environment where, as one retired law-enforcement official warns, “There will be no boundaries in relation to what fraud can be perpetrated.”
Crime investigators state that the crimes per se do not completely change. From our common frauds and Ponzi schemes to intricate security breaches, tax avoidance and money laundering, there are still various ways a criminal can make a dirty buck. When CNBC began in 1989, junk bond king Michael Milken was being accused of securities fraud charges in a sensational investigation. After 25 years, a new Wall Street insider-trading investigation — this time centering on hedge funds — has victimized 79 people, perhaps, more.
Imagine a world where an inside-trader can obtain his information not from an insider who works in a firm but from a hacker working outside and stealing data from the organization’s data systems in the cloud. He shares the data to others through a bunch of intricately encrypted, untraceable instant messages. The unlawful act is done in nanoseconds. The money is disbursed through virtual currency. And the criminals thrive happily plying their trade and stealing from other victims any new day.
And imagine a Ponzi schemer — a future-generation Bernie Madoff – except that he is not human at all but a poser for a rogue nation with the ability to rob you, spend your money and stash it away in a split second.
Enter the world of white-collar crime, 2039.
“Simply use your imagination as to the form of fraud you wish to perpetrate,” said Thomas G.A. Brown, who assisted in launching cyber investigations in the U.S. Attorney’s Complex Frauds Unit in Manhattan.
Brown, presently a senior managing director at FTI Consulting, said the future white-collar criminal will be quicker and more highly invisible than before — allowing the possibility for “nearly the perfect crime.”
In truth, cybercriminals can already perform some of those heists today.
“Crime in cyberspace is not merely the coming trend of the future; it is here with us now,” said E. Danya Perry, also a former senior deputy in the Manhattan U.S. Attorney’s office, now practicing privately. “I believe we will be seeing more of how this chameleon will evolve into a raging dragon.”
Cyberspace crimes already cost the U.S. economy about $120 billion yearly and the entire globe about $1 trillion, as revealed by a study published in 2013 by McAfee and the Center for Strategic and International Studies. And all that in a crime onslaught that is comparatively only new.
Prosecutors obtained a view of what the future will look like from last year’s taking down of Silk Road — a clandestine website which officials authorities claimed was “the most advanced and widespread illegal marketplace online.”
Although Silk Road specialized on the lucrative prohibited drug trafficking, Brown of FTI Consulting reported that agents uncovered methods that could “skyrocket financial crime’s spread.”
The primary technique among several promising tools is the new virtual currency called bitcoin, which is already changing the face of the global payment structure.
“Bitcoin is so hard to manage,” Brown said.
In the Silk Road case, which Brown built with others, the federal government has captured an amount of over $33 million bitcoin money from the computers of the site’s accused founder, Ross William Ulbricht. However, that amount is a small part the $1.2 billion in sales the system allegedly generated within less than three years of operation. And detecting where the rest of the money is located is almost impossible.
“Imagine every bitcoin as being a gold bar,” Brown said. No one knows where that gold bar originated, and anyone can readily sell it for cash. “Anyone can steal it and run away with it.”
Even if agents can locate bitcoin in a certain account, that clue will not mean the owner can be traced. “No one is required to register a bitcoin account in a genuine name,” Brown said.
There exist other virtual currencies aside from Bitcoin. Back in 2013 as well, a federal grand jury in New York charged Liberty Reserve for trafficking in the currency referred to as LR. Officials captured five Internet domains and charged 35 currency-trading websites in what was billed by Manhattan U.S. Attorney Preet Bharara as one of the biggest global money-laundering cases in legal history.
The implications of the virtual money revolution on white-collar crime are vast. At the bottom, Brown said, the virtual cash could make tax avoidance become easier than before.
“I can enter into any kind of deal I want to derive income without paying taxes since no one is aware of what I’m doing,” Brown said.
“The financial rewards are going to be very compelling for any person to want to trespass the law ,” Perry said.
Exactly how regulators and law enforcers will clamp down on those tempting baits — and what government agencies will head the move — remains unresolved.
In March, the Internal Revenue Service released its first advisory on virtual currencies such as LR and bitcoin.
“Virtual money is considered as property for U.S. federal tax purposes,” the IRS stated in a March 25 announcement. “A disbursement with virtual cash is covered by information reporting within the same limitations imposed upon any other disbursement made in property,” the announcement stated.
Yet, in our world where financial crimes are perpetrated by faceless people, where do we point an accusing finger?
“Locating people in an environment of uncertain identities is a difficult task,” said Perry. “When you have a place where you can make deals incognito, this sort of problem will keep going.”
In the Silk Road investigation, officials say numerous drug dealers and over 100,000 of their customers covered their identities by utilizing what are called tumblers, which jumbled their personal identity information to produce anonymous transactions.
Cybercriminals now also often use a technology called Tor — formerly the acronym for The Onion Router, for its multi-layered complexity — to hide their online tracks.
Tor software, which is free online, lets the user to hide his PC’s IP address — its virtual fingerprint — as well as every server’s IP address to which the PC connects.
“Imagine a gigantic pinball machine,” Brown said, where your PC is the silver ball bouncing around. Each time the ball touches a bumper, its identity — or IP address — changes and so with the bumper, making it “functionally impossible” to trace the traffic.
Aside from making illegal deals and underground websites invisible, Tor provides criminals —whether the financial kind or otherwise — a means to interact and pass on data more easily than before.
“Traditionally, you have to identify ‘Harry from Bensonhurst’ or ‘Johnny from the block’ to round up a robbery group,” Brown said.
Today, with their virtual masks covering their faces using all the new technology, white-collar criminals, hackers and identity robbers can assemble and exchange information without fear in so-called carding venues. For such bandits, chat rooms are not merely for socializing. They are sources of stolen identities, software code and even cash beyond the scope of authorities.
“A savvy crook utilizing effective functional security is almost impossible to locate,” said Brown.
Falling prey to the schemes of tomorrow’s crook, he said, are firms that are already forced to share more and more of their valuable information in the web and in the cloud so their workers and clients can readily get that information — a signal for hackers to prowl for victims.
“Many firms concentrate on merely the collecting and using of the information instead of securing that information,” Brown clarified.
The future white-collar cybercriminal may not be a single person. It could actually be a whole country. Brown is apprehensive of the coming “nation-state” in financial crime. “Much of this is not talked about extensively, if at all, due to its confidential nature,” he said.