Brokerage accounts were allegedly hacked with simple email fraud. Here's how to protect yourself

In November, prosecutors in Brooklyn said a Lithuanian man and an unknown accomplice emptied user brokerage accounts, stealing hundreds of thousands of dollars. Losses would be much greater if not for a group of investors who took several simple but tricky steps to prevent fraud.

Vytautas Parfionovas allegedly worked with accomplices to trick one-day traders and their financial advisers into liquidating securities, sending cash through brokerage houses, and creating new fraudulent trading accounts in the names of the victims.

The complaint against Partfionovas looks like a list of what you can and cannot do to protect your accounts from one of the most common and expensive types of electronic fraud. Here is what you need to know.

What is email compromise?

There are many types of compromised business emails, but in all of them, the fraudster uses electronic means of communication, usually email, to convince someone to transfer money to an offshore account.

A fraudster often targets the victim by hacking or forging the email of a trusted third party, such as a lawyer, financial advisor, product seller, or real estate broker. From this trusted email, the fraudster can send an urgent message stating that the payment should be sent to a new account.

Fraudsters can also snoop on a compromised email account, look for valuable information such as account numbers and bank transfer habits, and even learn how to mimic the victim's communication style.

For doing this, the hacker needs to get access only to the huge number of email addresses and passwords that have been leaked to clandestine forums. They can then try to match the leaked passwords with the email addresses of people who, in their opinion, have large personal or business accounts.

How to protect yourself

Electronic fraud can be devastating due to the simple fact that when someone loses money in this way, the bank is not obliged to make the victim "whole," that is, money very often goes away forever.

Know your advisers well. Work face-to-face or over the phone with financial advisors you know and trust, and let them know that you are worried about cybercrime and fraud.

Keep track of your email.

Do not run your entire financial business by email. Think about the types of information available in your email account.

If you have more than one email address, determine which one contains the most confidential information and confirm the strength of your passwords. In particular, if you have emails with very old passwords, they may already be hacked - so change them.

It is also a good idea to set up two-factor authentication.

Communicate as fast as you can if you are scammed. If you suspect that you have been the victim of fraud, contact your financial institution or advisor as soon as possible.

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