 All right, next up we have financial crime the past present and future Please give a warm torque on welcome to Marcelo Mansur. All right Hi, my name is Marcelo, and I'm from London if you haven't heard of me. Don't feel bad. I have the exact same problem in London So yeah, I said my name is Marcelo, and I'm one of these I'm not one of these or one of these or one of these I used to be one of these It was my job to sell these products to these people but the whole thing turned out to be this when these people made us so um He has a brief look at the products we sold They were generally commodities and I found out after we are rated that for the most part the way that the scan works was that they were Far more We basically what our company had marked them up something like generally by about a thousand times at least from what they were Actually valued at or in some and like the worst cases. They just didn't even exist Now one thing we didn't sell and one thing that's really sort of I guess synonymous with boiler rooms are Pink sheet stocks penny stocks micro cap stocks. Has anyone seen Wolf of Wall Street? Okay, I'll take that as a yeah from most of you Cool. So yeah, that's what that's what they're doing in that basically and these work kind of different from just a standard These work in a way as it's called a pump and dump scheme This this pump and dump scheme started getting you know It was quite synonymous with with I guess the internet in in the early eight in the early days of it Because it was used by a guy called Jonathan Lebed who he got in trouble with the SEC He was the first person in general to know to have done this but he'd been going into one-line forums and you know creating hundreds of fake accounts and Basically, I'm hyping up stocks that he owns like a fair amount of so everyone who'd take his advice would jump in push the entire price of the stock up and then he'd get out and You know the the the share price was like I had been artificially inflated So in the end it ended up just you know losing everyone else a lot of money now, um Yeah, as you can see he did pretty well I mean 12 grand and in some cases like 74 grand a day is pretty good Especially when you think about the fact that Jonathan Lebed was 15 years old at the time and Yeah, also like at the end of it was interesting because the SEC find him something like 200 grand and said he couldn't he couldn't Trade for a number of years, but he still ended up walking away with at least half a million in basically illicit trades Generally though, that's just one guy in a forum hyping things up generally when that's done by brokerages They'll they'll have like they'll have a whole team as you see in Wolf of Wall Street You know plug in these things and the brokerage owns a big chunk of the stock So if you want to know what happens to your money when you invest in a scheme like that That that's what happens You can kind of see from here like on the In the far corner as as they start to you know get on the phone to start selling the stock it has a huge up a huge increase and then at the top is when they decide just to sell everything and If you if you're if you weren't part of the brokerage and if you just one of the people who got in and decided to hold on See what happened you ended up out here with absolutely nothing Okay, so moving on and we'll get back to that sort of thing in a minute Who was working in tech at the time of the tech boom or the yeah? Okay, a couple of you was it fun Right, so I'm what we have here. This is the Nasdaq So this is the index of the top hundred tech stocks in the US at the time of We're going up to the tech boom and then and then afterwards and as you can see obviously just around 2000 It was starting to do very well, and then when the bubble burst they're on the way back down and when around sort of 2000 mid 2001 2002 Investors wanted to with there was no clear end to like this bear market Inside a bear market is a market that's going down a bull market is a market that's going up Just use those two animals. Don't make your own ones up. It doesn't work So I've gotten a major problem in San Diego's yesterday But yeah, so yeah around sort of 2002 let investors will still want to be able to make money from the market despite despite the poor conditions, so They started to look at other ways are the non-traditional ways of investing their money And this is what led to the rise of the hedge fund That's I guess the inverse of that chart That shows around the same sort of time sort of 2002 This is when people started to move their money out of the traditional kind of long only funds and into hedge funds The reason being is hedge funds and also hedge funds got them quite quite popular because with banks because they were Trade an awful lot and every time a house like that makes a trade the banks getting some all there or the brokers Making some sort of commission from it If you take your traditional long only funds like Fidelity They'll go through committee and subcommittee before any kind of share price or share purchases approved Whereas hedge funds don't care. They'll trade like whirling dervishes. You get sometimes you get enormous buy and sell orders Sometimes like within the same hour So yeah Interesting thing about hedge funds as well is they can do something called shorting Which is generally when you as you guys know if when you buy to invest something you Well, you buy and then if it gains value you make your money And if it does if it loses value then you lose your money Shorting works in the exact opposite way. It's basically where you borrow shares and Sort of I guess sell them and get them and get the difference back later on but the long of the short of it is that You make money when you short shares if the price goes down as opposed to If it goes up and hedge funds did this a lot So even while the the the market was going down hedge funds were still making absolute killing of it because They were just shorting a load of tech stocks and well all kinds of things and The reason I bring up hedge funds in particular is because there are some almost with insider trading I Could just read that out, but I'm sure you guys can read if you don't know what insider trading is It's yeah that is a lot of people think that A lot of people say insider trading. Oh, it's really not a bad thing I Prefer I the best analogy I have for describing it is imagine You're selling your car that you know only has about 20 miles left to someone else at face value or selling it Someone else as new now you're getting a great deal on what's effectively a useless piece of junk Whereas the guy who you're selling it to it has no idea that what he's bought is completely worthless That's kind of what's going on when you're selling if you have some insider information about share that's about to drop That's pretty much what's happening when you sell it on because the person that you're who's buying it from you Doesn't have access to to that same information that you do So yeah, why is this all relevant Who knows what they are? And you want does anyone trade financial markets themselves does anyone have like a foreign exchange account or something like that? Okay one person so These Things that pretty much anyone here can just open an account with Put some money into and start playing around with the market on their own now with these you can in the same way I'm so you can leverage meaning that if you put in let's say a thousand dollars You can effectively trade with generally up to ten thousand dollars of what's basically borrowed money but the If as in if your if your trade goes well and you make a correct prediction then the more money you make Will you basically make about ten times as much money as you would if you were just trading with your own thousand dollars? The flip side is if your trade goes wrong, then you're losing it ten times as fast now Not any of these my lawyers have told me to say but apparently there are some foreign exchange brokers or some Spread better is that you can actually invest your money in just purely using Bitcoin Therefore, not you know not requiring the standards, you know bank account, etc. That can identify you So where does this lead us does anyone know this guy? Because due to what I see on LinkedIn that guy's responsible for all the hacking ever Anyone knows someone who can like vomit code like that Who here's are there any pentesters in here? Well, actually are there any hackers in here? None you bunch of liars Like who's ever let's say just you know on a job who's ever hacked into someone's private email address before? I'm just gonna assume no one's gonna tell the truth here But yeah, so let's say you know a fair few of you and those who haven't know that at least it's generally not a difficult thing to Generally not a difficult thing to do who thinks that if you hacked into a CEO's private email you'd you'd better definitely be able to see share price sensitive information that you could probably act on and Make a killing on Especially if you're gonna use not one of those but a company like one of those that you can you know anonymize your account with Has this happened yet Yeah a few times and some people have been caught and some people haven't the first and I guess most obvious case And the one that's made the most noises is this a Big coalition between traders in well, yeah traders in New York and hackers in Ukraine Who would basically collaborate and over the course of a few years ended up making something like a hundred or just over a hundred million dollars on? illicit trades that were purely based off of the fact that they'd been able to gain information that isn't privy to isn't available to the general public and It's interesting because the the fines or the the sentences given for this was fairly small when you take into account that Very few people get convicted of insider trading. So the few that do the SEC and the courts like to make a big Example of them like there was a guy called Raj Raj Ratnam who ran a big hedge fund called galleon group They had something like nine billion dollars under management when he was caught insider trading like they had him on on record Like like recorded conversations between him and the people who'd Been sort of getting information for him and they'd say things like oh, yeah, I just got off the phone with my guy Played him like a fiddle When you have that kind of thing recorded it's a bit difficult to deny it But he ended up getting 23 years for what was basically just you know trading off off insider secrets So it's interesting to see that we're seeing Less, you know less serious sentences for this kind of thing especially when you take into account that there's not just They're not just listening to things. They're actually they are breaking computer crime rules as well Another example so these three guys Does anyone want to have a guess where they might be from? It's unfair to family in one of them one of them from the Philippines, but yeah, they are um, they are Then they were known as the Chinese three It's a bit racist if you think about it just ignore the Philippines guy, but um But yeah, um, so they these guys they we wasn't what they did wasn't even particularly sophisticated So they they did make successful insider trades on on a couple of acquisitions that that happened But they had something like over a hundred. Oh, yeah, they've made something like 90 something attempts and most of which were Most most of which were thwarted, but then a few of them did go Well according to plan, but then they ended up getting caught um and As far as people who haven't got caught has anyone heard of Finn for Okay, so far I wrote a report about them a couple of years ago and since then there hasn't been much much else that's come out All we know about them is that they they're most likely still at large. They definitely native English speakers. They definitely understand Wall Street lingo and financial slang if you like and as opposed to doing what some of the previous crews have been doing They're not dropping malware or anything like that. They're literally just spearfishing and reading confidential emails And they're setting up sort of commit in some case. They set up conditions so that certain emails delete themselves for example, like if this admins Email someone saying look, I think you've been hacked. It's like anything with the word hacked in just gets deleted That sort of thing. So it's it's a fairly basic Concepts and is why I think they they were able to sort of operate for a while without Without without getting caught or without, you know coming up on anyone's radar But yeah, so that's still a large and I'm interestingly a method they use very much focuses on the nature of the financial industry So this is an email that was sent. This is one of the phishing emails that they had that was sent to That was sent to I guess one of their victims and they're playing If anyone's worked in the financial sector, you'll know there are a fair few egos going around in there And it's basically an email that says look there's someone on this on this financial forum Who's talk who works for you? Who's talking shit about you? I don't think it's a very good thing for your company Here's a link. Just have a look at that and Yeah, and obviously the links infected so Well, that's how that works So yeah, we have these I guess three cases of three definitely known cases of groups operating in in hacking versus hacking and inside a trading sense But is this is this stuff open source? Is this this is done like individually? Yeah, I think for a mix between these people and these people But there are an awful lot of forums and stuff on the all two forums mainly on the dark net The biggest one being kick ass nothing to do with kick ass torrents. I don't even know what that is. Don't ask me But yeah, so kick ass is just it's one of it's a underground marketplace They involved in an awful lot of things one of them is confidential information now as Part of research for this I did consider attempting to get on board with them and create an account just to sort of Have a snoop inside the forum and see what was going on But it costs 250 bucks a month and apparently once you pass selection It costs a thousand a month. So I mean sorry to all con. I don't love you that much but um also apparently kick ass is set up by three traders two analysts and basically are effectively an entire team of I guess the ideal people to run a scheme like this And there's another one online as well called the stock insiders stock insiders is a little bit more Exclusive like they don't mess around with other things, but they do have yeah, they do have supposedly a very elite kind of Close-knit group who have good access to confidential financial information So again, I had a look at this and see if I could get in but then I think on this one to get in you need to You need to offer them a piece of information and then they'll verify and if it works and they let you into the forum And one I don't have information like that and two I'm not gonna break the law Just just just for a talk, but yeah Another concern that's bothered a fair few people is Sometimes it's not necessarily difficult. You don't necessarily need to have an awful lot of people who have this kind of information It's not it's quite easy to bribe and it does happen quite a lot of people who are I guess? lowly paid members of companies being bribed to click on links that they're sent to them so yeah, um I guess today we've just looked at how financial crime used to work how it weighs it sort of working now and here We just have a brief glimpse of the future and companies like Red Owl said the insider trading on the dark net doubled last year and Unless I'm completely insane. We it's gonna triple quadruple, etc. Until some sort of fix has found to this I Don't know what the fix is, but I am asking the questions And I should probably tell you that that's the end of my tour because otherwise you're gonna wonder where I've gone But if anyone has any questions feel free no questions So Yeah, I mean funny story about that actually the guy who um so the the boiler room that I worked for several years ago I might I long I long later found out that the guy who actually interviewed me for that position who I never saw again Was actually the kingpin of an operation of about 30 different boiler rooms That we're operating in the UK and I found out yesterday morning He's just been arrested in Morocco for Actually, it was is a co-working scam before that he was on the run from the SEC for a Bitcoin scam But it wasn't that wasn't particularly sophisticated It was just he set up a platform and people put money in and it was just a Ponzi scheme So it wasn't it wasn't particularly sophisticated, but if you're asking will we Be likely to see a lot more of this in terms of cryptocurrency definitely. Yeah It's interesting. There's enough money to be made in that sort of scene without having to completely, you know, rip people off Yeah, yeah, exactly and also with a Bitcoin It's interesting to see the way that worked and and still is working because since it's it's it was a completely I guess new concept in in the world of Investing the way it behaved was completely unlike any other asset like we saw I mean what six years ago It was less than point one cent less way less than point one cent for a Bitcoin And then it's shot up to what for that for grand like a couple of days ago or a couple of weeks ago Nothing's ever behaved like that and especially not in the crazy kind of spike Fashion we've seen with Bitcoin and probably what will happen is Bitcoin over This is purely speculation. So don't do anything based on this But like probably Bitcoin will over the next few years It will start to level out and then one day and not in not too long It will start behaving like a normal currency does But I think we'll still see loads of stuff like Ethereum, Potcoin, Dogecoin like all the other kind of Crypt major crypto currencies that are coming out probably do the exact same thing So like a huge rush and then down and then maybe like another one that goes even higher in a couple of years But I don't think anything will pick up in the same way as as Bitcoin did or to the same volume anyone else This would have been a bit longer, but I only had 20 minutes So that's why I sort of rushing through a little bit. But yeah, cool. Thanks a lot guys. It's been great