Monday, February 24, 2020

Santa Monica Man Arrested on Federal Charges of Staging Cyberattacks on Computer System of Congressional Candidate

          LOS ANGELES – FBI agents this morning arrested a Santa Monica man on federal charges stemming from a series of distributed denial-of-service – or DDoS – attacks on a website for a candidate who was campaigning for a California congressional seat.

          Arthur Jan Dam, 32, was taken into custody this morning pursuant to a criminal complaint filed Wednesday that charges him with one count of intentionally damaging and attempting to damage a protected computer.

          Dam allegedly staged four cyberattacks in April and May of 2018 that took down the candidate’s website for a total of 21 hours. “The victim reported suffering losses, including website downtime, a reduction in campaign donations, and time spent by campaign staff and others conducting critical incident response,” according to the affidavit in support of the criminal complaint. The victim further reported spending $27,000 to $30,000 to respond to the attacks, and the candidate believes the attacks contributed to the loss in the primary election in June 2018.

          “Law enforcement at all levels has pledged to ensure the integrity of every election,” said United States Attorney Nick Hanna. “We will not tolerate interference with computer systems associated with candidates or voting. Cases like this demonstrate our commitment to preserving our democratic system.”

          “Today’s arrest shows the FBI’s commitment to hold accountable anyone who interferes with an American’s right to vote or who deprives a candidate the right to compete fairly in an election,” said Paul Delacourt, the Assistant Director in Charge of the FBI’s Los Angeles Field Office. “As part of our mission to defend the democratic process, the FBI is equipped with the expertise to respond to allegations of election interference; whether by fraud, intimidation or – as in this case – cyber intrusions.”

          The investigation outlined in the affidavit found that the cyberattacks all originated from one Amazon Web Services (AWS) account, which Dam controlled, and the four attacks corresponded to logins into that AWS account from either Dam’s residence or his workplace. Furthermore, Dam had conducted “extensive research” on both the victim and cyberattacks, the complaint alleges.

          DDoS attacks typically are accomplished by flooding the targeted computer with superfluous requests in an attempt to overload systems and prevent some or all legitimate requests from being fulfilled. After the third cyberattack, the victim increased cybersecurity measures and retained a website security company, but that was not enough to prevent a final disruption to the campaign’s website just one week before the primary election.

          Dam was married to a woman who was employed by another candidate – and the eventual winner – in the congressional race, according to the complaint. The FBI has not uncovered any evidence that the winning candidate or Dam’s wife orchestrated or were involved in the series of cyberattacks.

          Dam was arrested this morning after surrendering to FBI agents at the United States Courthouse in downtown Los Angeles. Dam is expected to make his initial court appearance this afternoon.

          A criminal complaint contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty beyond a reasonable doubt.

          If he were to be convicted of the charge of intentionally damaging and attempting to damage a protected computer, Dam would face a statutory maximum sentence of 10 years in federal prison.

          The FBI investigated this case.

          This matter is being prosecuted by Assistant United States Attorneys Cameron L. Schroeder and Joseph B. Woodring of the Cyber and Intellectual Property Crimes Section.

Monday, February 17, 2020

Chinese Telecommunications Conglomerate Huawei and Subsidiaries Charged in Racketeering Conspiracy and Conspiracy to Steal Trade Secrets

Charges also Reveal Huawei’s Business in North Korea and Assistance to the Government of Iran in Performing Domestic Surveillance

WASHINGTON – A superseding indictment was returned yesterday in federal court in Brooklyn, New York, charging Huawei Technologies Co., Ltd. (Huawei), the world’s largest telecommunications equipment manufacturer, and two U.S. subsidiaries with conspiracy to violate the Racketeer Influenced and Corrupt Organizations Act (RICO).

The 16-count superseding indictment also adds a charge of conspiracy to steal trade secrets stemming from the China-based company’s alleged long-running practice of using fraud and deception to misappropriate sophisticated technology from U.S. counterparts.

The indicted defendants include Huawei and four official and unofficial subsidiaries — Huawei Device Co., Ltd. (Huawei Device), Huawei Device USA Inc. (Huawei USA), Futurewei Technologies, Inc. (Futurewei) and Skycom Tech Co. Ltd. (Skycom) — as well as Huawei’s Chief Financial Officer (CFO) Wanzhou Meng (Meng).[1]  The new superseding indictment also contains the charges from the prior superseding indictment, which was unsealed in January 2019.

Richard P. Donoghue, United States Attorney for the Eastern District of New York; Brian A. Benczkowski, Assistant Attorney General of the Justice Department’s Criminal Division; John C. Demers, Assistant Attorney General of the Justice Department’s National Security Division; and Christopher A. Wray, Director, Federal Bureau of Investigation (FBI), announced the charges.

Mr. Donoghue thanked the FBI, Homeland Security Investigations (HSI), U.S. Department of Commerce Office of Export Enforcement (OEE) and the Defense Criminal Investigative Service (DCIS) agents who are investigating this case for their tireless work and dedication.

As revealed by the government’s independent investigation and review of court filings, the new charges in this case relate to the alleged decades-long efforts by Huawei, and several of its subsidiaries, both in the U.S. and in the People’s Republic of China, to misappropriate intellectual property, including from six U.S. technology companies, in an effort to grow and operate Huawei’s business.  The misappropriated intellectual property included trade secret information and copyrighted works, such as source code and user manuals for internet routers, antenna technology and robot testing technology.  Huawei, Huawei USA and Futurewei agreed to reinvest the proceeds of this alleged racketeering activity in Huawei’s worldwide business, including in the United States.

The means and methods of the alleged misappropriation included entering into confidentiality agreements with the owners of the intellectual property and then violating the terms of the agreements by misappropriating the intellectual property for the defendants’ own commercial use, recruiting employees of other companies and directing them to misappropriate their former employers’ intellectual property, and using proxies such as professors working at research institutions to obtain and provide the technology to the defendants.  As part of the scheme, Huawei allegedly launched a policy instituting a bonus program to reward employees who obtained confidential information from competitors.  The policy made clear that employees who provided valuable information were to be financially rewarded.

Huawei’s efforts to steal trade secrets and other sophisticated U.S. technology were successful.  Through the methods of deception described above, the defendants obtained nonpublic intellectual property relating to internet router source code, cellular antenna technology and robotics.  As a consequence of its campaign to steal this technology and intellectual property, Huawei was able to drastically cut its research and development costs and associated delays, giving the company a significant and unfair competitive advantage. 

When confronted with evidence of wrongdoing, the defendants allegedly made repeated misstatements to U.S. officials, including FBI agents and representatives from the U.S. House Permanent Select Committee on Intelligence, regarding their efforts to misappropriate trade secrets.  Similarly, the defendants engaged in obstructive conduct to minimize litigation risk and the potential for criminal investigations, including the very investigation that led to this prosecution.

The superseding indictment also includes new allegations about Huawei and its subsidiaries’ involvement in business and technology projects in countries subject to U.S., E.U. and/or U.N. sanctions, such as Iran and North Korea – as well as the company’s efforts to conceal the full scope of that involvement.  The defendants’ activities, which included arranging for shipment of Huawei goods and services to end users in sanctioned countries, were typically conducted through local affiliates in the sanctioned countries.  Reflecting the inherent sensitivity of conducting business in jurisdictions subject to sanctions, internal Huawei documents allegedly referred to such jurisdictions with code names.  For example, the code “A2” referred to Iran, and “A9” referred to North Korea.

Huawei employees also allegedly lied about Huawei’s relationship to Skycom, falsely asserting it was not a subsidiary of Huawei.  The company further claimed that Huawei had only limited operations in Iran and that Huawei did not violate U.S. or other laws or regulations related to Iran.  In fact, the indictment alleges Skycom was Huawei’s unofficial subsidiary that, among other services, assisted the Government of Iran in performing domestic surveillance, including during the demonstrations in Tehran in 2009.

The charges in the superseding indictment are allegations, and the defendants are presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law.

The government’s investigation is ongoing.  Individuals with knowledge of misconduct by Huawei, its subsidiaries, employees or agents should contact the FBI’s New York Field Office at 1-800-CALL-FBI.

The investigation is being jointly conducted by the FBI’s New York Field Office, HSI’s New York Field Office, OEE’s New York Field Office and DCIS’s Southwest and Northeast Field Offices.  Agents from the FBI, HSI and OEE offices in Dallas provided significant support and assistance.  The government’s case is being handled by the U.S. Attorney’s Office for the Eastern District of New York, the Justice Department Criminal Division’s Money Laundering and Asset Recovery Section (MLARS) and the Justice Department National Security Division’s Counterintelligence and Export Control Section (CES).

Assistant U.S. Attorneys Alexander A. Solomon, Julia Nestor, David K. Kessler and Sarah Evans, MLARS Trial Attorneys Laura Billings and Christian Nauvel and CES Trial Attorneys Thea D. R. Kendler and David Lim are in charge of the prosecution, with assistance provided by Assistant U.S. Attorney Brendan G. King of the Civil Division of the U.S. Attorney’s Office for the Eastern District of New York and Trial Attorneys Margaret O’Malley and John Riesenberg of DOJ’s Office of International Affairs.  Additional Criminal Division and National Security Division Trial Attorneys and Assistant U.S. Attorneys within U.S. Attorney’s Offices for the Northern District of Texas, the Northern District of Illinois, the Eastern District of Texas, the Western District of Washington and the Northern District of California have provided valuable assistance with various aspects of this investigation.

The Defendants:

Huawei Technologies Co. Ltd.

Huawei Device Co., Ltd.

Huawei Device USA Inc.

Futurewei Technologies, Inc.

Skycom Tech Co. Ltd.

 E.D.N.Y. Docket No. 18-CR-457 (AMD)

Monday, February 10, 2020

Eight Miami-Dade Residents Plead Guilty to Offenses Related to Computer Fraud and Embezzlement Scheme Targeting Miccosukee Resort & Gaming

MIAMI – On February 4, 2020, Ariana Fajardo Orshan, U.S. Attorney for the Southern District of Florida, George L. Piro, Special Agent in Charge, Federal Bureau of Investigation, Miami Division, and Roland D. Pandolfi, Chief of Police, Miccosukee Police Department, announced the convictions of all eight (8) defendants in United States v. Michel Aleu, et al. Case No. 19-20435-Cr-Gayles.

Four of the defendants, Michel Aleu, Lester Lavin, Yohander Jorrin Melhen, and Leonardo Betancourt, all former employees and licensees of Miccosukee Gaming, pled guilty and were convicted of conspiracy to steal funds in excess of $1,000 from Miccosukee Gaming, conspiracy to commit computer fraud, and money laundering conspiracy.  Their respective spouses, defendants Maria Del Pilar Aleu, Anisleydi Vergel Hermida, and Milagros Marile Acosta Torres, pled guilty and stand convicted of conspiracy to commit money laundering offenses.  Yohander Jorrin Melhen and Milagros Acosta Torres were the last defendants to plead guilty, when they appeared in Court on Friday, January 31, 2020.

As stated in court documents, from January 2011 to May 2015, Michel Aleu, Lavin, Jorrin Melhen, Betancourt, and other co-conspirators, who were employed in the video game department at the Miccosukee Casino, tampered with the computers in electronic gaming machines, causing those machines to generate false and fraudulent credit vouchers or tickets.  They then enlisted other conspirators to exchange the vouchers for cash at ATMs located on the casino floor, at floor cashiers, or the casino treasury.  Casino records disclose that the defendants and their co-conspirators stole approximately $5.3 million in cash from Miccosukee Gaming.  The defendants used the stolen funds to purchase and maintain residences and investment properties, to purchase vehicles, vessels, and Florida Prepaid College Plans for certain of their children, and to pay for travel and household expenses.

The defendants are now awaiting sentencing before United States District Judge Darrin P. Gayles.  Each defendant faces a maximum term of 20 years’ imprisonment for money laundering conspiracy.  Michel Aleu, Lavin, Jorrin Melhen, and Betancourt face maximum terms of five years on their convictions for conspiracy to steal from Miccosukee Gaming and conspiracy to commit computer fraud.

U.S. Attorney Fajardo-Orshan commended the investigative efforts of FBI and Miccosukee Police Department.  This case was prosecuted by Assistant U.S. Attorney Dwayne Williams and Asset Forfeiture Assistant U.S. Attorney Nicole Grosnoff.