Posts Tagged: Stephen Ryan


15
May 19

A Tough Week for IP Address Scammers

In the early days of the Internet, there was a period when Internet Protocol version 4 (IPv4) addresses (e.g. 4.4.4.4) were given out like cotton candy to anyone who asked. But these days companies are queuing up to obtain new IP space from the various regional registries that periodically dole out the prized digits. With the value of a single IP hovering between $15-$25, those registries are now fighting a wave of shady brokers who specialize in securing new IP address blocks under false pretenses and then reselling to spammers. Here’s the story of one broker who fought back in the courts, and lost spectacularly.

On May 14, South Carolina U.S. Attorney Sherri Lydon filed criminal wire fraud charges against Amir Golestan, alleging he and his Charleston, S.C. based company Micfo LLC orchestrated an elaborate network of phony companies and aliases to secure more than 735,000 IPs from the American Registry for Internet Numbers (ARIN), a nonprofit which oversees IP addresses assigned to entities in the U.S., Canada, and parts of the Caribbean.

Interestingly, Micfo itself set this process in motion late last year when it sued ARIN. In December 2018, Micfo’s attorneys asked a federal court in Virginia to issue a temporary restraining order against ARIN, which had already told the company about its discovery of the phony front companies and was threatening to revoke some 735,000 IP addresses. That is, unless Micfo agreed to provide more information about its operations and customers.

At the time, many of the IP address blocks assigned to Micfo had been freshly resold to spammers. Micfo ultimately declined to provide ARIN the requested information, and as a result the court denied Micfo’s request (the transcript of that hearing is instructive and amusing).

But by virtue of the contract Micfo signed with ARIN, any further dispute had to be settled via arbitration. On May 13, that arbitration panel ordered Micfo to pay $350,000 for ARIN’s legal fees and to cough up any of those 735,000 IPs the company hadn’t already sold.

According to the criminal indictment in South Carolina, in 2017 and 2018 Golestan sold IP addresses using a third party broker:

“Golestan sold 65,536 IPv4 addresses for $13 each, for a total of $851,896,” the indictment alleges. “Golestan also organized a second transaction for another 65,536 IP addresses, for another approximately $1 million. During this same time period, Golestan had a contract to sell 327,680 IP addresses at $19 per address, for a total of $6.22 million” [this last transaction would be blocked.] Continue reading →


24
Mar 16

Phishing Victims Muddle Tax Fraud Fight

Many U.S. citizens are bound to experience delays in getting their tax returns processed this year, thanks largely to more stringent controls enacted by Uncle Sam and the states to block fraudulent tax refund requests filed by identity thieves. A steady drip of corporate data breaches involving phished employee W-2 information is adding to the backlog, as is an apparent mass adoption by ID thieves of professional tax services for processing large numbers of phony refund requests.
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According to data released this week by anti-fraud company iovation, the Internal Revenue Service is taking up to three times longer to review 2015 tax returns compared to past years.

Julie Magee, commissioner of Alabama’s Department of Revenue,  said much of the delay this year at the state level is likely due to new “fraud filters” the states have put in place with Gentax, a return processing and auditing system used by about half of U.S. state revenue departments. If the states can’t outright deny a suspicious refund request, they’ll very often deny the requested electronic bank deposit and issue a paper check to the taxpayer’s known address instead.

“Many states decided they weren’t going to start paying refunds until March 1, and on our side we’ve been using all our internal fraud resources and tools to analyze the tax return before we even put it in the queue,” Magee said. “That’s delaying refunds nationwide for the IRS and the states, and it’s pretty much going to also mean a helluva lot of paper checks are going out this year.”

The added fraud filters that states are employing take advantage of data elements shared for the first time this tax season by the major online tax preparation firms such as TurboTax. The filters look for patterns known to be associated with phony refund requests, such how quickly the return was filed, or whether the same Internet address was seen completing multiple returns.

Magee said some of the states have been adding new fraud filters nearly every time they learn of another big breach involving large numbers of stolen or phished employee W2 data, a huge problem this tax season that is forcing dozens of companies large and small to disclose data breaches over the past few weeks.

“Every time we turn around getting a phone call about another breach,” Magee said. “Because of all the different breaches, the states and the IRS have been taking extreme measures to filter, filter, filter. And each time we’d get news of an additional breach, we’d start over, reprogram our fraud filters, and re-assess those returns that were not processed fully yet and those waiting to be processed.”

Magee said the Gentax software assigns each tax return a score for “wage confidence” and “identity confidence,” and that usually fraudulent tax refund requests have high wage confidence but low — if any — identity confidence. That’s because the fraudsters are filing refund requests on taxpayers for whom they already have stolen W2 information. The identity confidence in these cases is low often because the fraudsters are asking to have the money electronically deposited into an account that can’t be directly tied to the taxpayer, or they have incorrectly supplied some of the victim’s data.

“I have zero confidence that filings which match this pattern are legitimate,” Magee said. “It’s early still, but our new filtering system seems to be working. But it’s still a big unknown about the percentage of fraudulent refunds we’re not stopping.”

MORE W2 PHISHING VICTIMS

athookMost states didn’t start processing returns until after March 1, which is exactly when a flood of data breaches related to phished employee W2 data began washing up. As KrebsOnSecurity first warned in mid-February, thieves have been sending targeted phishing emails to human resources and finance employees at countless organizations, spoofing a message from the CEO requesting all employee W2’s in PDF format.

In Magee’s own state, W2 phishers hauled in tax data on an estimated 180 employees of ISCO Industries in Huntsville, and some 425 employees at the EWTN Global Catholic Network in Irondale, Ala. But those are just the ones that have been made public. Magee’s office only learned of those breaches after employees at the affected organizations reached out to journalists who then wrote about the compromises.

Over the past week, KrebsOnSecurity similarly has heard from employees at a broad range of organizations that appear to have fallen victim to W2 phishing scams, including some 28,000 employees of the market research giant Kantar Group; 17,000+ employees of Sprouts Farmer’s Market; call center software provider Aspect; computer backup software maker AcronisKids Dental Kare in Los Angeles; Century Fence, a fencing company in Wisconsin; Nation’s Lending Corporation, a mortgage lending firm in Independent, Ohio; QTI Group, a Wisconsin-based human resources consulting company; and the jousting-and-feasting entertainment company Medieval Times. Continue reading →