Hackers Fleece Online Brokerages

Identity thieves continue to take a toll on online brokerages, racking up millions of dollars in losses to trading houses. Brokerages typically cover losses resulting from fraud, rather than forcing customers to pay. TD Ameritrade Holding issued a statement indicating that in the previous quarter, losses from fraud totaled $4 million.

E*Trade Financial said it lost $18 million in the same period.

Officials from the two companies downplayed the news. Joseph Moglia, chief executive of TD Ameritrade, called the $4 million in losses “not material at all,” while executives from both firms said they have recently taken steps to limit losses resulting from identity theft.

Mitchell Caplan, CEO of E*Trade, said the level of fraud has dropped “to almost zero as a result of the changes we’re making.” Still, the quarterly losses represent significant gains for online crooks. Gwenn Bezard, analyst with Aite Group, noted that E*Trade has previously implemented measures to bolster its defenses but that hackers still took the company for $18 million in a single quarter.

ZDNet, 25 October 2006