The National Attorneys General Training & Research Institute

The National Attorneys General Training & Research Institute The National Attorneys General Training & Research Institute

Cybercrime Newsletter September 2018

The following is a compendium of news reports, case law and legislative actions over the latest bi-monthly period that may be of interest to our AG offices that are dealing with cyber-related issues. Neither the National Association of Attorneys General nor the National Attorneys General Training & Research Institute expresses a view as to the accuracy of news accounts, nor as to the position expounded by the authors of the hyperlinked articles.

Court Decisions to Note

The Second Circuit ruled that the lower court made no error in declining to suppress location information accessed from defendant’s cell phone records, deciding that the U.S. Supreme Court’s decision in Carpenter, which prevents law enforcement from accessing cell phone location information without a warrant, could not be the basis to overturn defendant’s conviction because law enforcement was acting under existing precedent at the time. U.S. v. Zodhiates.

The Seventh Circuit unanimously affirmed defendant’s robbery conviction, even though he was placed at the scene of the robbery by cellphone location information obtained without a warrant, finding that although the U.S. Supreme Court’s decision in Carpenter ruled that such searches violated the Fourth Amendment, law enforcement in the instant case had obtained the information prior to Carpenter. U.S. v. Curtis.

The Vermont Supreme Court found that AOL (now operating as Oath Inc.) did not violate the suspect’s Fourth Amendment rights by searching its stored communications to assist in a law enforcement investigation because it was acting within its terms of service. State v. Lizotte.

The U.S. District Court for the Eastern District of New York ordered cryptocurrency trading advice company Cabbage Tech and its principal, Patrick McDonnell, to pay $1.1 million in civil monetary penalties and restitution resulting from a suit brought by the Commodity Futures Trading Commission accusing the company and its principal of engaging in a deceptive and fraudulent virtual currency scheme.

The U.S. District Court for the Eastern District of Texas granted health care staffing firm AHS Staffing’s application for a preliminary injunction against a rival firm it accused of stealing trade secrets and sabotaging its database. AHS Staffing, LLC v. Quest Staffing Group Inc.

The U.S. District Court for the Eastern District of New York sentenced Peter Persaud, a former JP Morgan Chase personal banker, to 48 months in prison for aggravated identity theft in connection with access device fraud. Persaud used the personal identification and account information of bank customers to make unauthorized withdrawals from those accounts.

George Koutsostamatis, a former BP America economist, pled guilty to one count of wire fraud in the U.S. District Court for the Southern District of Texas. He admitted to sending an email to the company falsely claiming to possess the personal information of company employees and their families, as well as claiming he had infiltrated BP’s computers and computer network system.

A U.S. District Court for the District of Northern Georgia jury convicted Nigerian citizen Olayinka Olaniyi of computer fraud, conspiracy to commit wire fraud and aggravated identity theft. Olaniyi participated in a phishing scam targeting U.S. colleges and universities, including Georgia Tech and the University of Virginia.

Attorney David Waldman pled guilty to conducting an extensive cyberstalking campaign targeting a woman he previously dated at the U.S. District Court for the Southern District of New York. He faces a maximum sentence of ten years in prison on one count of cyberstalking and one count of sending interstate threats.

Cyber Developments

The SEC issued orders rejecting the applications for nine bitcoin-based exchange-traded funds (ETFs) over concerns about fraud and manipulation. The applications were from ProShares, GraniteShares and Direxion.

Action Fraud, Great Britain’s national fraud and cybercrime statistics center, reported that victims lost more than two million euros ($2.6 million) in cryptocurrency scams during June and July 2018, an average of 10.096 euros per person. The center noted that fraudsters were cold calling victims and using social media platforms to advertise “get rich quick” trading in cryptocurrencies.

The European Parliament’s Committee on Economic and Monetary Affairs issued a draft report for regulation of crowdfunding in which the committee proposes that providers of crowdfunding services be permitted to raise funds through their platforms using cryptocurrencies, if they adhere to stricter requirements. The proposal would affect the EU’s new rules on crowdfunding and regulation of initial coin offerings (ICOs).

Legislative Update

The California legislature passed SB 1355, which would ban the operation of a drone on or above the grounds of a correctional facility.

Other State Cases of Interest

The Massachusetts Supreme Court found defendant’s statements denying that he knew the victim were properly admitted where the police had probable cause to believe that defendant’s cell phone would contain evidence of the crime since they had information that defendant and the victim had been together on the day of the murder, the victim’s boyfriend had overheard defendant confessing to the murder on his cell phone, and the cell phone would have been at risk of theft or vandalism given the area where it was found. Commonwealth v. Cruzado.

The New Jersey Supreme Court ruled that mobile video recorder (MVR) recordings were criminal investigatory records and were therefore not subject to disclosure under the State’s Open Public Records Act. Paff v. Ocean County Prosecutor's Office. AAG Raymond Chance III argued the case for the State; DAG Daniel Vannella represented the State on the brief.

The North Carolina Court of Appeals found that because defendant raised no Fourth Amendment objection at the satellite monitoring hearing, and the issue was not implicitly addressed by the trial court, it was not preserved for appellate review. State v. Lindsey. Special DAG Joseph Finarelli represented the State.

An Ohio appellate court found defendant’s motion to suppress evidence pursuant to a search warrant was properly denied because the warrant for a GPS was supported by sufficient probable cause. State v. Stock.

A Texas appellate court ruled that the affiant provided no facts that a computer containing surveillance video was involved in the crime, such that the existence of surveillance video or equipment could be reasonably inferred. Foreman v. State.

Other Federal Cases of Interest

The First Circuit affirmed the lower court’s entry of summary judgment against the former employee on his claims of the illegal search of his work computer because the employer had authority to authorize the search. Boudreau v. Lussier.

The Third Circuit held defendant’s motion to suppress the cell phone attributed to him as evidence was properly denied because he failed to establish that he had a legitimate expectation of privacy in the cell phone and made no claim that he ever owned, possessed or had any privacy interest in the phone. U.S. v. Gatson.

The Fifth Circuit found that when the defendant uploaded files to SkyDrive, Microsoft’s PhotoDNA program automatically reviewed the hash values of those files and compared them against an existing database of known child pornography hash values, so whatever expectation of privacy he might have had in the hash values of his files was frustrated by Microsoft’s private search. U.S. v. Reddick.

The Seventh Circuit ruled that the public utility’s collection of city residents’ energy consumption at 15-minute intervals constituted a search; however, the search was reasonable because the government’s interest in smart meters was significant and the search was minimally invasive. Naperville Smart Meter Awareness v. City of Naperville.

The Eleventh Circuit upheld the lower court’s denial of motions to suppress cell site data obtained through three court orders pursuant to the SCA because the SCA order allowing government access to the cellular provider’s records was not constitutionally unreasonable and the officers acted in good faith. U.S. v. Joyner.

Cybercrime Initiatives in the Attorney General Community

Twenty-three Attorneys General filed a brief in a lawsuit urging the U.S. District Court for the District of Columbia to vacate and reverse the FCC’s rollback of net neutrality.

Arizona Attorney General Mark Brnovich announced that Reynaldo Granado was sentenced to 14 years in prison for sexual exploitation of a minor after using a messaging application to download images and a video of child pornography.

Wisconsin Attorney General Brad Schimel’s Internet Crimes Against Children (ICAC) Task Force arrested convicted felon Ryan Frederick on two counts each of possession of child pornography and a firearm.


Hedda Litwin is the Editor of the Cybercrime Newsletter and may be reached at 202-326-6022. The Cybercrime Newsletter is a publication of the National Association of Attorneys General. Any use and/or copies of this newsletter in whole or part must include the customary bibliographic citation. NAAG retains copyright and all other intellectual property rights in the material. For content submissions or to contact the editor directly, please e-mail hlitwin@naag.org.

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