hoax

Bernie Madoff & the 1st worldwide Ponzi scheme

business, history, law, tech in changing society / /

From Diana B. Henrioques’s “Madoff Scheme Kept Rippling Outward, Across Borders” (The New York Times: 20 December 2008):

But whatever else Mr. Madoff’s game was, it was certainly this: The first worldwide Ponzi scheme — a fraud that lasted longer, reached wider and cut deeper than any similar scheme in history, entirely eclipsing the puny regional ambitions of Charles Ponzi, the Boston swindler who gave his name to the scheme nearly a century ago.

…

Regulators say Mr. Madoff himself estimated that $50 billion in personal and institutional wealth from around the world was gone. … Before it evaporated, it helped finance Mr. Madoff’s coddled lifestyle, with a Manhattan apartment, a beachfront mansion in the Hamptons, a small villa overlooking Cap d’Antibes on the French Riviera, a Mayfair office in London and yachts in New York, Florida and the Mediterranean.

…

In 1960, as Wall Street was just shaking off its postwar lethargy and starting to buzz again, Bernie Madoff (pronounced MAY-doff) set up his small trading firm. His plan was to make a business out of trading lesser-known over-the-counter stocks on the fringes of the traditional stock market. He was just 22, a graduate of Hofstra University on Long Island.

By 1989, Mr. Madoff ‘s firm was handling more than 5 percent of the trading volume on the august New York Stock Exchange …

And in 1990, he became the nonexecutive chairman of the Nasdaq market, which at the time was operated as a committee of the National Association of Securities Dealers.

His rise on Wall Street was built on his belief in a visionary notion that seemed bizarre to many at the time: That stocks could be traded by people who never saw each other but were connected only by electronics.

In the mid-1970s, he had spent over $250,000 to upgrade the computer equipment at the Cincinnati Stock Exchange, where he began offering to buy and sell stocks that were listed on the Big Board. The exchange, in effect, was transformed into the first all-electronic computerized stock exchange.

…

He also invested in new electronic trading technology for his firm, making it cheaper for brokerage firms to fill their stock orders. He eventually gained a large amount of business from big firms like A. G. Edwards & Sons, Charles Schwab & Company, Quick & Reilly and Fidelity Brokerage Services.

…

By the end of the technology bubble in 2000, his firm was the largest market maker on the Nasdaq electronic market, and he was a member of the Securities Industry Association, now known as the Securities Industry and Financial Markets Association, Wall Street’s principal lobbying arm.

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Matthew, the blind phone phreaker

history, law, security, tech in changing society / /

From Kevin Poulsen’s “Teenage Hacker Is Blind, Brash and in the Crosshairs of the FBI” (Wired: 29 February 2008):

At 4 in the morning of May 1, 2005, deputies from the El Paso County Sheriff’s Office converged on the suburban Colorado Springs home of Richard Gasper, a TSA screener at the local Colorado Springs Municipal Airport. They were expecting to find a desperate, suicidal gunman holding Gasper and his daughter hostage.

“I will shoot,” the gravely voice had warned, in a phone call to police minutes earlier. “I’m not afraid. I will shoot, and then I will kill myself, because I don’t care.”

But instead of a gunman, it was Gasper himself who stepped into the glare of police floodlights. Deputies ordered Gasper’s hands up and held him for 90 minutes while searching the house. They found no armed intruder, no hostages bound in duct tape. Just Gasper’s 18-year-old daughter and his baffled parents.

A federal Joint Terrorism Task Force would later conclude that Gasper had been the victim of a new type of nasty hoax, called “swatting,” that was spreading across the United States. Pranksters were phoning police with fake murders and hostage crises, spoofing their caller IDs so the calls appear to be coming from inside the target’s home. The result: police SWAT teams rolling to the scene, sometimes bursting into homes, guns drawn.

Now the FBI thinks it has identified the culprit in the Colorado swatting as a 17-year-old East Boston phone phreak known as “Li’l Hacker.” Because he’s underage, Wired.com is not reporting Li’l Hacker’s last name. His first name is Matthew, and he poses a unique challenge to the federal justice system, because he is blind from birth.

…

Interviews by Wired.com with Matt and his associates, and a review of court documents, FBI reports and audio recordings, paints a picture of a young man with an uncanny talent for quick telephone con jobs. Able to commit vast amounts of information to memory instantly, Matt has mastered the intricacies of telephone switching systems, while developing an innate understanding of human psychology and organization culture — knowledge that he uses to manipulate his patsies and torment his foes.

…

Matt says he ordered phone company switch manuals off the internet and paid to have them translated into Braille. He became a regular caller to internal telephone company lines, where he’d masquerade as an employee to perform tricks like tracing telephone calls, getting free phone features, obtaining confidential customer information and disconnecting his rivals’ phones.

It was, relatively speaking, mild stuff. The teen though, soon fell in with a bad crowd. The party lines were dominated by a gang of half-a-dozen miscreants who informally called themselves the “Wrecking Crew” and “The Cavalry.”
…

By then, Matt’s reputation had taken on a life of its own, and tales of some of his hacks — perhaps apocryphal — are now legends. According to Daniels, he hacked his school’s PBX so that every phone would ring at once. Another time, he took control of a hotel elevator, sending it up and down over and over again. One story has it that Matt phoned a telephone company frame room worker at home in the middle of the night, and persuaded him to get out of bed and return to work to disconnect someone’s phone.

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How con artists use psychology to work

1 Comment / business, science, security / /

From Paul J. Zak’s “How to Run a Con” (Psychology Today: 13 November 2008):

When I was in high school, I took a job at an ARCO gas station on the outskirts of Santa Barbara, California. At the time, I drove a 1967 Mustang hotrod and thought I might pick up some tips and cheap parts by working around cars after school. You see a lot of interesting things working the night shift in a sketchy neighborhood. I constantly saw people making bad decisions: drunk drivers, gang members, unhappy cops, and con men. In fact, I was the victim of a classic con called “The Pigeon Drop.” If we humans have such big brains, how can we get conned?

Here’s what happened to me. One slow Sunday afternoon, a man comes out of the restroom with a pearl necklace in his hand. “Found it on the bathroom floor” he says. He followed with “Geez, looks nice-I wonder who lost it?” Just then, the gas station’s phone rings and a man asked if anyone found a pearl necklace that he had purchased as a gift for his wife. He offers a $200 reward for the necklace’s return. I tell him that a customer found it. “OK” he says, “I’ll be there in 30 minutes.” I give him the ARCO address and he gives me his phone number. The man who found the necklace hears all this but tells me he is running late for a job interview and cannot wait for the other man to arrive.

Huum, what to do? The man with the necklace said “Why don’t I give you the necklace and we split the reward?” The greed-o-meter goes off in my head, suppressing all rational thought. “Yeah, you give me the necklace to hold and I’ll give you $100” I suggest. He agrees. Since high school kids working at gas stations don’t have $100, I take money out of the cash drawer to complete the transaction.

You can guess the rest. The man with the lost necklace doesn’t come and never answers my many calls. After about an hour, I call the police. The “pearl” necklace was a two dollar fake and the number I was calling went to a pay phone nearby. I had to fess up to my boss and pay back the money with my next paycheck.

Why did this con work? Let’s do some neuroscience. While the primary motivator from my perspective was greed, the pigeon drop cleverly engages THOMAS (The Human Oxytocin Mediated Attachment System). … THOMAS is a powerful brain circuit that releases the neurochemical oxytocin when we are trusted and induces a desire to reciprocate the trust we have been shown–even with strangers.

The key to a con is not that you trust the conman, but that he shows he trusts you. Conmen ply their trade by appearing fragile or needing help, by seeming vulnerable. Because of THOMAS, the human brain makes us feel good when we help others–this is the basis for attachment to family and friends and cooperation with strangers. “I need your help” is a potent stimulus for action.

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Craigslist “everything is free!” scams

law, security, tech in changing society / /

Robert Salisbury

From “Man scammed by Craigslist ad” (The Seattle Times: 24 March 2008):

The ads popped up Saturday afternoon, saying the owner of a Jacksonville home was forced to leave the area suddenly and his belongings, including a horse, were free for the taking, said Jackson County sheriff’s Detective Sgt. Colin Fagan.

But Robert Salisbury had no plans to leave. The independent contractor was at Emigrant Lake when he got a call from a woman who had stopped by his house to claim his horse.

On his way home he stopped a truck loaded down with his work ladders, lawn mower and weed eater.

“I informed them I was the owner, but they refused to give the stuff back,” Salisbury said. “They showed me the Craigslist printout and told me they had the right to do what they did.”

The driver sped away after rebuking Salisbury. On his way home he spotted other cars filled with his belongings.

Once home he was greeted by close to 30 people rummaging through his barn and front porch.

From “Couple held in Craigslist theft case” (The Seattle Times: 1 April 2008):

Police on Monday arrested a Medford couple who allegedly used hoax postings on Craigslist to cover up their own thefts from a rural Jacksonville residence later inundated by Craigslist readers who thought the house’s contents were free pickings for the taking.

Amber D. Herbert, 28, and Brandon D. Herbert, 29, were taken into custody on burglary, theft and computer crime charges involving the Craigslist hoax that drew international attention and cost the victim several thousand dollars, authorities said.

…the Herberts told police they took several saddles from the property and sold them over the Internet.

Laurie Raye

From “Tacoma woman’s house emptied after craigslist hoax” (The Seattle Times: 5 April 2007):

Laurie Raye said she had everything stripped from her home after someone placed a fake ad on the San Francisco-based Internet site, a collection of online classifieds.

…

Raye had recently evicted a tenant and cleaned out the rental.

The ad posted last weekend welcomed people to take for free anything they wanted from the home. It has since been pulled from the site, but not before the residence was stripped of light fixtures, the hot water heater and the kitchen sink.

Neighbors said they saw strangers hauling items away, apparently looking for salvage material.

Even the front door and a vinyl window were pilfered, Raye said.

“In the ad, it said come and take what you want. Everything is free,” she said. “Please help yourself to anything on the property.”

From “Woman charged after Craigslist posting resulted in a house stripped” (The Seattle Times: 17 May 2007):

Pierce County prosecutors have filed charges against the niece of a woman whose house was stripped clean after a Craigslist.org posting advertised that everything in the home was free.

Nichole Blackwell, 28, was charged with second-degree burglary, malicious mischief and criminal impersonation for allegedly posting an ad that read, “Moving out … House being demolished. Come and take whatever you want, nothing is off limits,” on the online classifieds Web site, according to charging documents from Pierce County Superior Court.

It wasn’t until six days after the ad was posted that Laurie Raye, owner of the home in the 1200 block of East 64th Street in Tacoma, checked on the house to find it stripped.

Nearly everything that wasn’t bolted down — and some stuff that was — was taken.

People, thinking that they could remove whatever they wanted, grabbed the refrigerator, front door and kitchen sink, among other things, according to the documents.

Police believe Blackwell disliked Raye and was particularly upset because Raye had recently evicted Blackwell’s mother from the house.

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The way to trick smart people

commonplace book, language & literature, politics, science, security, technology / /

From Paul’s “The easiest way to fool smart people“:

There’s a saying among con-men that smart people are easier targets, because they don’t think they can be conned.

I’m not sure if that’s true, but there’s one scam that’s almost guaranteed to make smart people switch off their brains and reach for their wallets. It’s a trick that’s used so pervasively in our culture, that once you become aware of it, you start to see it everywhere. …

Most smart people have a hidden weakness and it’s this – they’re absolute suckers for anything that sounds clever.

As soon as you start hitting people with technical terms, fancy graphs, famous names and the like, you’ll immediately increase your credibility. If they’re smart, they’re even more likely to find themselves nodding in agreement. Many intelligent people would rather cut off a finger than admit they don’t know what you’re talking about. …

Even better, they can pretend to be teaching their audience something important. A person who was previously completely ignorant about quantum physics now feels as if they understand something about it – even if that something is absolute baloney. The audience have been fed ideas they’ll now defend even against someone who’s a real expert in that subject. Nobody likes to be told that something they’ve been led to believe is wrong. …

Consultants behave this way because they know that’s how to get a sale. Bombard people with clever-sounding stuff they don’t really understand, and they’ll assume that you’re some kind of genius. It’s a great way of making money.

Stock analysts, economic forecasters, management consultants, futurologists, investment advisors and so on use this tactic all the time. It’s their chief marketing strategy for the simple reason that it works.

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Lost tribe hoaxes

commonplace book, history, technology / /

From Adam Goodheart’s “The Last Island of the Savages” (The American Scholar, Autumn 2000, 69(4):13-44):

Even so, every few years there is a report of one “lost tribe” or another – usually in the Amazon rain forest or the highlands of New Guinea – staggering naked from the jungle into the dazzling glare of modernity. Such stories are almost invariably followed by a retraction: the tribesmen turn out to have T-shirts and cigarettes stashed back in their huts, and the original report turns out to have been a mistake or a fraud. (The most famous such incident was the so-called Tasaday hoax of 1971, involving a supposed Stone Age tribe in the Philippines; the tribesmen were Filipino farmers whom local politicians had coerced into posing as naked cave-men for the camera crews from CBS and National Geographic.)

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