Tag Archives: fraud

VoIP Fraudster Pleads Guilty to $4.4 Million USD Theft of Services from AT&T, Verizon, Others

FbiNews out of the U.S. Federal Bureau of Investigation (FBI) last week was that a New Jersey man pled guilty to charges that he and his co-conspirators stole over $4.4 million USD of VoIP services from a range of VoIP service providers including AT&T, Verizon and many others.

Reading through the FBI news release, the scam really has nothing to do with “VoIP security”, per se, and everything to do with “social engineering.” Essentially, the group managed to appear to be a legitimate business so that VoIP service providers would let them resell their services to businesses. They then resold that service and pocketed the money without ever paying the service providers.

From the news release, it seems to have been a rather extensive scam:

To make it appear as if the shell companies were legitimate VoIP wholesalers and to induce the victim providers to extend credit to the companies on favorable terms, Tonangi and his co-conspirators took several fraudulent steps, including establishing fake business addresses for the shell companies at prominent New York locations, including the Empire State Building.

The co-conspirators also used Internet-based answering services that purported to connect callers to the shell companies’ various departments, such as accounts receivable and marketing, but really connected to cell phones controlled by the co-conspirators.

Tonangi and his co-conspirators created shell company e-mail accounts in the names of non-existent employees for communicating with victim providers; websites that contained false information, such as the names of non-existent employees and the companies’ fabricated qualifications to serve as VoIP wholesalers; and aliases to negotiate the purchase of VoIP services.

They also fabricated year-end financial reports that bore the logo of a national accounting firm in order to give the appearance that the shell companies’ financial reports had been reviewed by that firm.

When the victim providers sold VoIP services to the shell companies on credit, Tonangi and his co-conspirators would “bust out” the account by causing the companies to use substantially more VoIP services than the companies had been approved to buy in such a short period of time. The co-conspirators would do this over weekends and holidays so that the providers would not notice.

When the invoices for the services came due, the co-conspirators would send fake wire transfer confirmations via e-mail or submit small payments to keep the victim providers from cutting off service.

If victim providers sued or threatened to sue the shell companies, Tonangi and his co-conspirators would respond in legal pleadings or letters that they prepared in the name of a non-existent attorney, Frank Soss. Tonangi and Bhambhani created and used a fraudulent United States passport in the name Frank Soss by downloading and altering a exemplar passport image and photograph from the Internet.

Given the degree of subterfuge undertaken by the group, I’m not at all surprised that they fooled numerous companies into extending credit for VoIP services. When you are doing due diligence on a new customer, you would explore many of the avenues that these folks seem to have covered.

It’s not clear from the news release or any other information I’ve seen online what if any VoIP technology was used here but given that the group was acting as a legitimate business they didn’t need anything very sophisticated. Many software and service options would have met their needs.

It’s good to see the FBI successfully cracking this fraud ring… sadly I’m sure there will be others as we see the increased usage of VoIP across the industry.

P.S. Thanks to J. Oquendo in the VOIPSEC mailing list for alerting us to this news from the FBI.

VoIP Fraudster Edwin Pena sentenced to 10 years in prison and repayment of $1 million

Bringing closure to a case we’ve been following literally for years since it was first reported way back in June 2006, fraudster Edwin Pena was sentenced last Friday to 10 years in prison and ordered to repay the $1 million in restitution.  It appears he also won’t be in the US after he serves his time:

In addition to his 120-month prison sentence, Pena was ordered to pay restitution of a little more than $1m. He will also be deported once he completes his time. Pena has already surrendered a large number of luxury items that were purchased using the ill-gotten profits, including a 40-foot motor boat and a 2004 BMW M3.

Back in February 2010, Pena pled guilty and provided some details into what he had done. This previous blog post provides links to additional parts of the story.

Nice to see this finally end…

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VoIP Fraudster and Fugitive Edwin Pena pleads guilty

Updating a story we have literally been following for years ever since it broke back in July 2006, the FBI recently issued a news release indicating that Edwin Pena pled guilty in what we have been calling the “Pena/Moore VoIP fraud case”. From the news release:

Edwin Pena, 27, a Venezuelan citizen, pleaded guilty before U.S. District Judge Susan D. Wigenton to one count of conspiracy to commit computer hacking and wire fraud and one count of wire fraud. Judge Wigenton continued Pena’s detention without bond pending his sentencing, which is scheduled for May 14.

The news release goes on to provide a summary of what Pena admitted:

At his plea hearing, Pena, who purported to be a legitimate wholesaler of these Internet-based phone services, admitted that he sold discounted service plans to his unsuspecting customers. Pena admitted that he was able to offer such low prices because he would secretly hack into the computer networks of unsuspecting VOIP providers, including one Newark-based company, to route his customers’ calls.

Through this scheme, Pena is alleged to have sold more than 10 million minutes of Internet phone service to telecom businesses at deeply discounted rates, causing a loss of more than $1.4 million in less than a year. The victimized Newark-based company, which transmits VOIP services for other telecom businesses, was billed for more than 500,000 unauthorized telephone calls routed through its calling network that were “sold” to the defendant’s unwitting customers at those deeply discounted rates.

Pena admitted that he enlisted the help of others, including a professional “hacker” in Spokane, Washington. The hacker, Robert Moore, 24, pleaded guilty before Judge Wigenton in March 2007 to federal hacking charges for assisting Pena in his scheme. Judge Wigenton sentenced Moore to 24 months in prison on July 24, 2007. At his plea hearing, Moore admitted to conspiring with Pena and to performing an exhaustive scan of computer networks of unsuspecting companies and other entities in the United States and around the world, searching for vulnerable ports to infiltrate their computer networks to use them to route calls.

Pena admitted that rather than purchase VOIP telephone routes for resale, Pena—unbeknownst to his customers—created what amounted to “free” routes by surreptitiously hacking into the computer networks of unwitting, legitimate VOIP telephone service providers and routing his customers’ calls in such a way as to avoid detection.

After receiving information from Moore, Pena reprogrammed the vulnerable computer networks to accept VOIP telephone call traffic. He then routed the VOIP calls of his customers over those networks. In this way, Pena made it appear to the VOIP telephone service providers that the calls were coming from a third party’s network.

By sending calls to the VOIP telephone service providers through the unsuspecting third parties’ networks, the VOIP telephone service providers were unable to identify the true sender of the calls for billing purposes. Consequently, individual VOIP Telecom providers incurred aggregate routing costs of up to approximately $300,000 per provider, without being able to identify and bill Pena.

According to the Complaint, in order to hide the huge profits from his hacking scheme, Pena purchased real estate, new cars, and a 40-foot motor boat, and put all of that property except for one car in the name of another individual identified in the Complaint as “A.G.”

So it looks at long last we can end this particular chapter in the story of VoIP security. I suppose we may mention whatever jail time he gets in May… but at this point he has pled guilty and admitted what he has done.

The lesson for security professionals in this whole episode really came out of the interview I participated in with Robert Moore, mostly that you need to remember “IT security 101” and use strong passwords, ensure your systems are patched appropriately, etc., etc., so that your systems aren’t used in a scheme like this!

In any event, this particular story seems to be drawing to an end…

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