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Financial Fraud Law

‘SpyEye’ Creator Pleads Guilty to Conspiracy to Commit Wire and Bank Fraud

 Aleksandr Andreevich Panin, a Russian national also known as “Gribodemon” and “Harderman,” has pleaded guilty to conspiracy to commit wire and bank fraud for his role as the primary developer and distributor of the malicious software known as “SpyEye,” which, according to industry estimates, has infected over 1.4 million computers in the United States and abroad.

“Given the recent revelations of massive thefts of financial information from large retail stores across the country, Americans do not need to be reminded how devastating it is when cyber criminals surreptitiously install malicious codes on computer networks and then siphon away private information from unsuspecting consumers,” said Acting Assistant Attorney General Mythili Raman.  Now, he added, “Aleksandr Panin has admitted to his orchestration of this criminal scheme to use ‘SpyEye’ to invade the privacy of Americans by infecting their computers through a dangerous botnet.  As this prosecution shows, cyber criminals – even when they sit on the other side of the world and attempt to hide behind online aliases – are never outside the reach of U.S. law enforcement.”

According to the charges and other information presented in court, SpyEye is a sophisticated malicious computer code that is designed to automate the theft of confidential personal and financial information, such as online banking credentials, credit card information, usernames, passwords, PINs, and other personally identifying information. The SpyEye virus facilitates this theft of information by secretly infecting victims’ computers, enabling cyber criminals to remotely control the infected computers through command and control (C2) servers.  Once a computer is infected and under their control, cyber criminals can remotely access the infected computers, without authorization, and steal victims’ personal and financial information through a variety of techniques, including “web injects,” “keystroke loggers,” and “credit card grabbers.”   The victims’ stolen personal and financial data is then surreptitiously transmitted to the C2 servers, where it is used to steal money from the victims’ financial accounts.

Prosecutors said that Panin was the primary developer and distributor of the SpyEye virus.   According to the government, operating from Russia from 2009 to 2011, Panin conspired with others, including codefendant Hamza Bendelladj, an Algerian national also known as “Bx1,” to develop, market and sell various versions of the SpyEye virus and component parts on the Internet.  The government said that Panin allowed cyber criminals to customize their purchases to include tailor-made methods of obtaining victims’ personal and financial information, as well as marketed versions that specifically targeted designated financial institutions; advertised the SpyEye virus on online, invitation-only criminal forums; and sold versions of the SpyEye virus for prices ranging from $1,000 to $8,500. The government said that Panin was believed to have sold the SpyEye virus to at least 150 “clients,” who, in turn, used them to set up their own C2 servers.   One of Panin’s clients, “Soldier,” is reported to have made more than $3.2 million in a six-month period using the SpyEye virus, according to prosecutors.

According to industry estimates, the SpyEye virus has infected more than 1.4 million computers in the United States and abroad, and it was the preeminent malware toolkit used from approximately 2009 to 2011.   Based on information received from the financial services industry, over 10,000 bank accounts have been compromised by SpyEye infections since 2013 alone.   Some cyber criminals continue to use SpyEye today, although its effectiveness has been limited since software makers have added SpyEye to malicious software removal programs, the government said.

In February 2011, pursuant to a federal search warrant, the FBI searched and seized a SpyEye C2 server allegedly operated by Bendelladj in the Northern District of Georgia.   The government said that that C2 server controlled over 200 computers infected with the SpyEye virus and contained information from numerous financial institutions.

Prosecutors said that in June and July 2011, FBI covert sources communicated directly with Panin, who was using his online nicknames “Gribodemon” and “Harderman,” about the SpyEye virus.   FBI sources then purchased a version of SpyEye from Panin that contained features designed to steal confidential financial information, initiate fraudulent online banking transactions, install keystroke loggers, and initiate distributed denial of service (DDoS) attacks from computers infected with the malware.
On December 20, 2011, a Northern District of Georgia grand jury returned a 23-count indictment against Panin, who had yet to be fully identified, and Bendelladj.   The indictment charged one count of conspiracy to commit wire and bank fraud, 10 counts of wire fraud, one count of conspiracy to commit computer fraud, and 11 counts of computer fraud. A superseding indictment was subsequently returned identifying Panin by his true name.

Bendelladj was apprehended at Suvarnabhumi Airport in Bangkok, Thailand, on January 5, 2013, while he was in transit from Malaysia to Algeria.   Bendelladj was extradited from Thailand to the United States on May 2, 2013.   His charges are currently pending in the Northern District of Georgia.

Panin was arrested by U.S. authorities on July 1, 2013, when he flew through Hartsfield-Jackson Atlanta International Airport.

The government said that its investigation also has led to the arrest of four of Panin’s SpyEye clients and associates in the United Kingdom and Bulgaria.

Sentencing for Panin is scheduled for April 29, 2014, before United States District Judge Amy Totenberg of the Northern District of Georgia.

The government said that “[v]aluable assistance” in this case had been provided by Trend Micro’s Forward-looking Threat Research (FTR) Team, Microsoft’s Digital Crimes Unit, Mandiant, Dell SecureWorks, Trusteer and the Norwegian Security Research Team known as “Underworld.no.”

 Contact the author at smeyerow@optonline.net

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