Francis J. Diskin, United States Attorney for the Western District of
Washington, and Charles E. Mandigo, Special Agent in Charge, Seattle Division,
Federal Bureau of Investigation, announced that a jury returned guilty
verdicts yesterday against VASILIY GORSHKOV, age 26, of Chelyabinsk, Russia,
on 20 counts of conspiracy, various computer crimes, and fraud committed
against Speakeasy Network of Seattle, Washington; Nara Bank of Los Angeles,
California; Central National Bank of Waco, Texas; and the online credit
card payment company PayPal of Palo Alto, California. Sentencing for GORSHKOV
is scheduled before Chief United States District Judge John C. Coughenour
in Seattle at 9:00 a.m. on January 4, 2002. GORSHKOV faces a maximum sentence
of five years in prison on each count, for a total statutory maximum of
100 years in prison, as well as a maximum fine of $250,000 on each count.
According to evidence presented at trial and other court records:
GORSHKOV was one of two men from Chelyabinsk, Russia, who were persuaded
to travel to the United States as part of an FBI undercover operation.
The operation arose out of a nationwide FBI investigation into Russian
computer intrusions that were directed at Internet Service Providers,
e-commerce sites, and online banks in the United States. The hackers used
their unauthorized access to the victims computers to steal credit
card information and other personal financial information, and then often
tried to extort money from the victims with threats to expose the sensitive
data to the public or damage the victims computers. The hackers
also defrauded PayPal through a scheme in which stolen credit cards were
used to generate cash and to pay for computer parts purchased from vendors
in the United States. The FBIs undercover operation was established
to entice persons responsible for these crimes to come to U.S. territory.
As part of the operation, the FBI created a start-up computer security
company named "Invita" in Seattle, Washington. Posing as Invita
personnel, the FBI communicated with GORSHKOV and the other man, Alexey
Ivanov, by e-mail and telephone during the summer and fall of 2000. The
men agreed to a face-to-face meeting in Seattle. As a prelude to their
trip to the United States, the FBI arranged a computer network for the
two men to hack into and demonstrate their hacking skills. The men successfully
broke into the test network.
GORSHKOV and Ivanov arrived in Seattle, Washington, on November 10, 2000,
and a meeting was held at the office of Invita. Unbeknownst to the Russian
men, the participants in the meeting were undercover FBI agents and the
meeting was recorded on audio and video tape. During the meeting, GORSHKOV
discussed their hacking prowess and took responsibility for various hacking
incidents and activities. GORSHKOV shrugged off any concern about the
FBI, explaining that the FBI could not get them in Russia. When asked
about their access to credit cards, GORSHKOV declined to talk about it
while they were in the United States and added that "this kind of
question is better discussed in Russia."
At the conclusion of the Invita undercover meeting, the two men were arrested.
Ivanov was transported to the District of Connecticut to face charges
for a computer intrusion at the Online Information Bureau of Vernon, Connecticut.
GORSHKOV and Ivanov were charged in the Western District of Washington
with conspiracy and 19 additional crimes involving Speakeasy, Nara Bank,
Central National Bank - Waco, and PayPal.
A few days after the two men were arrested, the FBI obtained access via
the Internet to two of the mens computers in Russia. The FBI copied
voluminous data from the accounts of GORSHKOV and Ivanov and then obtained
a search warrant from a United States Magistrate Judge. GORSHKOVs
pretrial challenge to the FBIs copying and subsequent search of
the Russian data was denied by Chief Judge Coughenour in a written order
dated May 23, 2001.
The data copied from the Russian computers provided a wealth of evidence
of the mens computer hacking and fraud. They had large databases
of credit card information that was stolen from Internet Service Providers
like Lightrealm of Kirkland, Washington. More than 56,000 credit cards
were found on the two Russian computers. The Russian computers also contained
stolen bank account and other personal financial information of customers
of online banking at Nara Bank and Central National Bank - Waco.
The data from the Russian computers revealed that the conspirators had
gained unauthorized control over numerous computers including computers
of a school district in St. Clair County, Michigan and then used
those compromised computers to commit a massive fraud involving PayPal
and the online auction company e-Bay. The fraud scheme consisted of using
computer programs to establish thousands of anonymous e-mail accounts
at e-mail web sites like Hotmail, Yahoo!, and MyOwnEmail.
GORSHKOVs programs then created associated accounts at PayPal with
random identities and stolen credit cards. Additional computer programs
allowed the conspirators to control and manipulate e-Bay auctions so that
they could act as both seller and winning bidder in the same auction and
then effectively pay themselves with stolen credit cards.
Alexey Ivanov, age 20, also of Chelyabinsk, Russia, is still awaiting
trial in the District of Connecticut, and he remains under Indictment
in the Western District of Washington.
United States Attorney Francis J. Diskin stated: "The success of
this prosecution shows that the Department of Justice and the FBI will
expend whatever resources are necessary to protect the integrity of the
Internet and legitimate businesses from the devastating damage that can
be done by illegal hackers." U.S. Attorney Diskin also particularly
complimented the investigative work of the FBI, particularly Special Agents
Marty Prewett and Michael Schuler, the case agents, for the tireless work
required to bring GORSHKOV to justice.
Assistant United States Attorneys Stephen C. Schroeder and Floyd G. Short
prosecuted the case.
For further information please contact Assistant U.S. Attorneys Stephen
C. Schroeder at (206) 553-4098 or Floyd G. Short at (206) 553-2465, or
Executive Assistant United States Attorney Lawrence Lincoln at (206)553-4127.
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