TOKYO (TR) – Prosecutors on Friday announced the indictment of only one of two Chinese suspects in custody over their alleged involvement in a highly lucrative nationwide stock-trading scheme, reports Nippon News Network (Dec. 19).
On November 28, police announced the arrests of Lin Xinhai, 38, the operator of a company in Kawasaki City, Kanagawa Prefecture, and 42-year-old Jiang Rong, who lives in the capital.
Police accused Lin and Jiang of market manipulation under the Financial Instruments and Exchange Act and violating the Act on Prohibition of Unauthorized Access to Computer Systems.
Investigative sources said at the time that Lin and Jiang worked with accomplices on March 17 to illegally access accounts for 10 individuals.
Using these 10 accounts and an account under the name of L&H, a company run by Lin, they allegedly bought and sold about 2.6 million shares in a consulting firm listed on the Tokyo Stock Exchange Standard Exchange.
After fraudulently inflating the stock price, they sold their shares, making a profit of approximately 8.6 million yen.
On December 19, Tokyo District Public Prosecutors’ Office Special Investigation Division indicted Lin. However, Jiang was not indicted due to “insufficient evidence.”
Inflated value
The stock in question has a small trading volume, which made manipulation of its share price fairly simple with a small number of transactions.
Police believe Lin and his accomplices used a phishing scam to compromise the accounts of the 10 victims. They then sold stocks owned by those accounts.
With those funds, they artificially increased the share price of the stock through buy orders. Lin’s company then made huge gains in its account by then shares in that same stock at the inflated value.
“Account hijacking surged”
According to the Financial Services Agency, there were more than 9,348 cases of securities account hijacking between January and October this year with transactions totaling over 710 billion yen.
Atsuyoshi Shimazu is an expert on cybercrime at security firm Caulis in Tokyo’s Chiyoda Ward. He tells Shukan Bunshun (Dec. 11), “The first securities company phishing sites were spotted in November of last year. The following month, reports of unauthorized logins were made on multiple securities accounts. In March of this year, fraudulent trading due to account hijacking surged.”
The targets were companies with market capitalizations of less than 5 billion yen, making them easy targets for inflation of their share prices. The total value of fraudulent transactions in April exceeded 290 billion yen. While the October figure dropped to 19 billion yen.
“Account hijacking surged”
The arrests of Lin and Jiang were the first in Japan.
Several criminal groups are believed to be involved in these crimes. One group in particular, designated BP1, is attracting particular attention from the Japan Cybercrime Control Center, a collaboration between major corporations and academic institutions.
“It’s highly likely that this group or a spinoff group is also involved in this series of frauds,” says Shimazu.
They are believed to be an organization of Chinese origin. “Many of the new types of fraudulent emails used Chinese language tools,” a social affairs reporter tells Bunshun.
These criminals use highly confidential messaging apps like Telegram to recruit perpetrators. They also recruit with message boards with such discussion topics “stock price manipulation” and “stock trading.”
“We suspect that the two Chinese nationals arrested this time may have responded to solicitations on these message boards,” the aforementioned reporter says.
“Periods of losses”
According to Bunshun, Lin is originally from Fujian Province, China. He came to Japan at the age of 11.
Lin and Jiang were quickly tracked down because they used Lin’s corporate account in Japan.
After graduating from Komazawa University, Line founded a watch export and sales company in 2012.
“In 2017, he also founded a tobacco sales company,” an acquaintance of Lin tells the magazine. “He serves as an auditor for a software company in Fujian Province, but the company often experienced periods of losses.”
