The U.S. Department of Justice has charged Zohar Pinhasi, owner of the cybersecurity firm MonsterCloud and a well-known industry specialist, with wire fraud.
Pinhasi, 50 years old and of American and Israeli nationality, sold to companies victimized by cyberattacks an ‘ethical’ solution to recover their systems without giving in to hackers’ blackmail. However, he was secretly paying the extortionists themselves and charging his clients exorbitant fees for the service, keeping margins of up to 1,700%.
According to the formal indictment presented to a grand jury in the Eastern District of New York, the executive used aliases like ‘Zack Silver’ and ‘Zack Green’ to market an alleged method based on “proprietary tools” and “advanced decryption techniques.”
But it was all a scam. MonsterCloud did not actually have its own technology to unlock files encrypted by these incidents. The company directly contacted the cybercriminals, paid the demanded sum to obtain the recovery key, and subsequently billed the victim amounts substantially higher than the ransom paid.
Thanks to this maneuver, developed between 2018 and 2023, the company managed to bill more than 19 million dollars to organizations in crisis, while secretly disbursing about 8 million dollars to the extortionists.
In one case that occurred in August 2023, Pinhasi paid about 8,200 dollars to a cybercriminal for the decryption key and charged the client approximately 150,000 dollars for the supposed technical intervention.
After appearing in Brooklyn, the accused pleaded not guilty and was released on a 2 million dollar bond.
Double victimization
Federal authorities have harshly criticized the entrepreneur’s conduct for profiting from the vulnerability of affected companies.
A. Tysen Duva, Deputy Attorney General of the Justice Department’s Criminal Division, emphasized the seriousness of the events: “Pinhasi is accused of offering an alternative to ransom payments, but instead, allegedly re-victimized the victim and committed additional fraud, causing further harm.”
In the same vein, U.S. Attorney Joseph Nocella, Jr., responsible for the Eastern District of New York, highlighted the impact of this type of deception in the digital security sector: “By falsely claiming to decrypt ransomware without paying the extortionists, the defendant re-victimized his clients while obtaining a substantial economic benefit for himself.”
For his part, James C. Barnacle Jr., Deputy Director of the FBI, criticized that the security expert turned the victims’ crisis into “his own profit center.”
Pinhasi faces two counts of wire fraud and one count of conspiracy to commit wire fraud, offenses that carry a maximum penalty of up to 20 years in prison for each.
Both the FBI and the Cybersecurity and Infrastructure Security Agency (CISA) remind that paying ransoms in the face of cyberattacks is not recommended, as the payment does not guarantee the recovery of information nor does it prevent future leaks.
