Running With The Big Dogs: Sybil Norcroft Book Six (4 page)

“Most of those buy-writes have little to no open interest aside from that trader’s activity, resulting in all or nearly all of the call options being assigned. There have been at least fifty cases of theft from investors by outright embezzlement by stockbrokers and stock manipulation. Our internet monitors have alerted us to more than 300 internet “pump and dump” schemes.

“We have twenty-six confirmed counts of trading in customizable FLEX options in hard-to-borrow securities and/ or threshold list securities. Many of those are very shortterm FLEX options. We have identified a bunch of probable market makers trading in hard-to-borrow or threshold list securities claiming the option exception from the locate requirement of SHO; these traders haven’t made markets in these securities. They just make trades only to take advantage of the option mispricing. We have seven known traders who have succeeded in making multiple large trades with the same trader acting as a contra party in
several
hard-to-borrow or threshold list securities. It appears that several of these traders are assisting each other to avoid having to deliver shares. These actions cannot possibility be coincidental. We don’t have this many fraudulent trades in two years, let alone in two days.”

“How much money are we talking about, Agent Warden?” Andrew Grantland asked.

“Well, sir, in an average year we see something on the order of $10 to maybe $20 billion in fraudulent trades. The most I have ever seen in a single year was about $40 billion, to the best of my recollection. This is still an accounting nightmare, but even a conservative estimate of the level of theft in the last two days is in excess of $200 billion. I stress the use of the adjective, ‘conservative’.”

“Do you have any clear-cut evidence of collusion?” SAC Sondregger asked very seriously.

That would mandate involvement by the Federal Bureau of Investigation.

“Not for sure. I have only had an hour and a half to gather information, but there are some suggestive findings. First, many of the traders have eastern European surnames—the majority of which are Slavic or Russian. Second, they all seem to be independent day traders with no business connection with one another. That is a coincidence of the highest order, and I am pretty much allergic to the very concept of coincidence. Third, many of the names of the traders are phonies—which is a red-flag raiser, if ever there was one. Fourth—and this is just my preliminary take—someone is pulling the strings, and that someone has to be extremely well-connected with a motley assortment of shady traders.”

“Organized crime?”

“The Chinese?”

“Let me try out an answer to that,” said Andrew Grantland from the New York Regional Office. “U.S. criminal syndicates have considerable sophistication, but hardly the know-how to organize such a complicated effort. Besides, it is counter-intuitive for them. They need the NYSE and regional stock exchanges to launder their ill-gotten gains and to turn their profits in crime to legitimate earnings which are above suspicion.

The Chinese have a very sophisticated cyber hacking and cybertage capability and could feasibly pull this off. The government and the Fed are convinced that the PRC is desperate to ensure the U.S. economy—especially the stock markets—to preserve their investments. An injury to the U.S. economy of this order of magnitude would be a catastrophe for them. They would be shooting themselves in the foot if they did anything like this. It is easier to imagine a disgruntled U.S. federal agent or an angry Tea-Partier or union boss who thinks the present administration is going to destroy his union’s entitlements, or an exasperated Milton Friedman-type intent on making a point about how inefficient democracy is doing such a suicidal thing.

“Obviously, I don’t think any of those scenarios is reasonable. But consider the possibility that someone in the
russkaya mafiya
has a more-or-less pure motive to steal on the grandest scale ever accomplished in the history of the world and is completely lacking in conscience.”

“Now, that’s believable,” muttered MSD Chief Erick Nielsen.

“I think there is a flaw in the reasoning,” said SAC Sondregger, “while I know that the Russian Mafia is heartless and totally ruthless in its practices, they still have to operate with some level of approval by the Russian Federation. It seems unlikely to me that the Russian government would give even a ‘wink-wink, nod-nod’ to such a monstrous plan. None of this makes complete sense. I admit, however, that there has to be a major player whose identity is illusive for now.”

Agent Warden countered, “With all due respect, Special Agent Sondregger, over here on F Street, we think that the Russians
are
aware of something of which we have only had glimpses. They have hacked our military, federal government, and financial industry computer systems for years. That is a given and is the equivalent of the planting of listening device in the walls of the U.S. Embassy in Moscow—which came to be known as the ‘bug house’ in later years—by the Soviets insisting that only good Russians be hired to design and construct the embassy in 1988. If they know—that is, if they have the deepest of insider information—from the U.S. government that a near financial collapse is in the offing—they may be willing to embark on an extreme tactic of adventurism. In fact, they may be willing to partner up with one of the most powerful and effective of the
russkaya mafiya
outfits.”

“Like the
Solntsevskaya Bratva,”
SAC Sondregger said, beginning to accept the hypothesis that Agent Warden was weaving. “Our cyber watch people have identified Leonid Aleksandrovich Zaslavsky as the
vory v zakone
[syndicate boss and chief of the thieves-in-law] of Russia’s largest criminal group. They have somewhere north of 5,000 members, and they have a global reach. Interpol described the Solntsevo district
mafiya
as one of the best structured criminal organizations in Europe and that it operates as a quasi-military operation. The FBI indicated that Russian-speaking criminal syndicates control a third of the estimated $12 billion global cybercrime market. They have the best hackers in the world on their payroll. They would seem to be fully capable of pulling this off. All they would need to proceed is the tacit approval of President Afonasii Glebovich Tikhondnko.”

“It boggles the mind,” Andrew Grantland said, speaking for all of them. “We need to get this to the DFBI, the DOJ [Department of Justice], and the president.”

Chapter Five

White House Conference Center [an annex building of the White House], 726 Jackson Place in Washington, D.C., November 13, 2019, 0800 hrs
PDB [President’s Daily Briefing]
-Present: POTUS; VPOTUS; Attorney General; Speaker of the House; Senate Majority Leader; Secretaries of State and Treasury; DFBI; DCIA; Chairman CEA [Council of Economic Advisors]; Chairman, Federal Reserve Board; Chairperson, Council of Economic Advisers for the Congressional Joint Economic Committee; Director Homeland Security Computer Emergency Response Team—Industrial Control Systems Cyber Emergency Response Team [ICS-CERT]; Director National Cyber Investigative Joint Task Force; Director National Cyber-Forensics and Training Alliance; Director Strategic Alliance Cyber Crime Working Group; Director Coordinated Cyber Action Teams; Director CIA CTC [Counter Terror Center] Cyber-Terror Division; DUSCYBERCOM; DSEC Enforcement Division. Re: Response to attack on U.S. financial system

P
resident Willets had already heard most of what the assembled experts in counter cyber-terrorism were going to say because DFBI Grant Wallace had kept him abreast of developments throughout the day yesterday. The president nodded to Director Wallace to start the emergency meeting.

“Thank you, Mr. President. You are all, no doubt, aware that our financial systems are under attack. The exchanges are slated to open in two hours, and one example of the status of the systems should suffice: The Dow Industrial was at an all-time high three days ago—19,231. The Dow will open at 4,182 this morning. Our country as lost nearly $800 billion to this point in time, and the market remains in free fall.”

There was a small shared gasp in the room.

“Obviously, this cannot go on. There is no doubt that it is a deliberate and well-coordinated assault on the United States and could not have come at a worse time, given the precarious status of our economy vis-à-vis the national debt. Since the attack was discovered yesterday morning, we have thrown every cyber asset—government, military, and private—into the investigation. The FBI, CIA, USCYBERCOM, Homeland Security, General Motors, Delta Airlines and their cyber protection group, the SEC, and the United Banking Cyber Coalition are all involved.

“We are all but certain that the Russians are behind it, but we could never prove it in a court of law. We do know for certain that the Russian Mafia is involved because we have found signatures embedded in the hacking worms in our computer systems which are known to be the mark of two infamous Russian teen-age hackers, Afanasy Fedoseev and Lyosha Demidov. Although we have no such direct evidence, we can always be sure that the daughter of the head of one of the largest
russkaya mafiya
organizations, Renata Leonidovna Zaslavsky, is in the thick of it.”

“Well, that could not be more ticklish,” Secretary of State Thompson Kennedy said, “a public accusation against the Tikhondnko regime would be such an insult that the Russians would be duty bound to strike back. They are crude, and their strike would probably be a military one, and one to which we would be honor bound to reciprocate. We need to be creative and to tread lightly.”

President Willets agreed, “We are in no position to give in to a scenario that includes military adventurism. However, Director Wallace is also correct; this assault will cripple us—probably permanently—and cannot be allowed to go entirely unanswered. Unfortunately, for us, we do not have any kind of grace period during which diplomatic endeavors can be of any significant benefit.”

Secretary Kennedy had more to add, but decided to wait until a later point in the discussion to say his piece.

“Let’s hear your ideas, ladies and gentlemen,” President Willets asked.

“I think we have what may be an acceptable answer—one which cuts right to the chase,” DCIA Andrew Dillon said.

Director Dillon was chronically ill with congestive heart disease and was nearing the end of a one-year courtesy stint as DCIA as a reward for his forty years of service to The Company. He was tired and no longer felt that he had the strength to tackle such horrendous problems as the one currently under consideration. He knew that President Willets had chosen his successor and that it would probably be the current Surgeon General who was also a high-ranking special agent of the CIA. It could not happen soon enough for his liking.

“We have a special agent who holds an Ultra SCI [Top-Secret, Sensitive Compartmentalized Information, i.e. “above Top Secret”] clearance rating with SSBI [Single Scope Background Investigation rating. The president has authorized me to tell you the agent’s name because she is almost certainly going to be my successor, and he will need your help to get her confirmed because her accomplishments cannot be made public. She is Dr. Sybil Norcroft.”

In a day of striking revelations, that one ranked right up there with the rest. For most of the attendees, Sybil’s involvement with the CIA was a revelation; and that she was of such a rank within the Company that she would be considered for the position of director was nothing short of a shock.

Dillon continued without allowing discussion of his revelation; so, he could go on to an even more sensational one.

“Some time ago, she planted software from a USB device into the Russian president’s own computer and also into the SVR computer system. That software enables us not only to get every scintilla of information that passes among the administration, the intelligence community, and the military; but also allows us at the push of a button to interfere with almost any computer based function in the country. I will spare you the details of the intruder; but, trust me when I tell you that we can stop trains, cut off sections or the entire electrical grid, scramble air controller signals, confuse electronic signaling throughout the Russian Federation—you name it. And the best thing about it is that we can do any or all of that without leaving evidence that it was us. Until now, we have allowed our worm to lie silent in their supercomputer systems.”

The DUSCYBERCOM [Director U.S. Cyber Command], Cyril Farnsworth, asked, “What are our risks if we use the CIA’s worm?”

“Miniscule. Unlike the historical Stuxnet computer worm, there is no possible boomerang effect. There are no embedded vanity signatures. None of the interruptions can be traced to U.S. sources.”

“I’m going to shorten this discussion and cut right to the chase,” the president said, “several of you here have suggested that we contact President Tikhondnko and Prime Minister Yudin forthwith and make a threat or two. There doesn’t seem to be any quick way to deal with Leonid Aleksandrovich Zaslavsky, the
vory v zakone
[syndicate boss and chief of the thieves-in-law] of the
Solntsevskaya Bratva, russkaya mafiya
[Russian mafia] who is likely the real culprit in all of this. I am hoping that we can persuade Tikhondnko to handle them.”

“If he can,” Secretary Wallace said.

“It is better than war, which seems like the only other option. They have fired the first salvo, and a cybertage assault in kind would seem to be a measured response. A threat would be a much softer approach, but I am afraid the Russians are more the ‘show-me’ kind of people than the ‘tell-me’ kind.”

There was a unanimous vote by those present to have President Willets brave the bear in his cave.

Chapter Six

President Afonasii Glebovich Tikhondnko’s Office, Royal Apartments in the Terem Palace, The Kremlin, Moscow,
Rossiyskaya Federatsiya
, November 13, 2019, 0900 hrs

“M
r. President, it’s the red phone,” the executive secretary said.

Calls on the red phone could only be from the American President, the Chairman of the Communist Party of the PRC, or the Director-General of the United Nations.

“It is the U.S. president, Sir.”

“Hello, Parker. To what do I owe this pleasure?”

“As you might expect, the use of this telephone means I am not calling for a frivolous bit of chit-chat.”

“Indeed so.”

“I will come directly to the point.”

“You always do. That is one thing I like about you, Parker.”

“And I, you, Afonasii Glebovich. You cannot be unaware of our financial problems.”

“Of course not, my friend. You have our sincerest sympathy, and I extend my hand in an offer of help. How can I assist you? We have not forgotten your assistance during our Era of Stagnation while we were experimenting with collective rule.”

“Afonsaii Glebovich, our current financial woes are serious; they are the result of a deliberate attack on our financial infrastructure; and they have been traced back to the Russian government as identified by our financial, counter cyber terrorism, and law enforcement agencies. My government and I personally, are deeply offended by your country’s actions. As one leader of reform a super-power to another, I am giving you the courtesy of a personal call to ask you to correct this dangerous path.”

“And, I am affronted by your accusation. How dare you, Sir!? We have done nothing of the kind. I demand that you send us your so-called ‘evidence’ so that we can evaluate its validity. You are treading on dangerous ground yourself if you think you can make such a challenge to the great Russian nation with impunity!”

“I see that courtesy and diplomacy are not going to carry the day, President Tikhondnko. This is what we expect to happen. By this afternoon at the latest, the short-selling attack on our stock market will cease; the perpetrators who are not already in our custody will be identified by you and turned over to us; and you will force Zaslavsky and his
Solntsevskaya Bratva
to cease and desist from his cyber and trading assaults on our financial institutions.”

“Or what? You will stamp your foot or pound on your U.N. desk to show your anger and frustration? Do you think we are naughty children whom you can make cower with a threat?”

“No, Sir. I think none of that. I believe you are the ultimate pragmatists and learn effectively from objective demonstrations. I will bid you good-bye, Afonasii Glebovich; and I will await your call.”

President Willets hung up his end of the line.

President Tikhondnko shouted a string of obscenities before calming down enough to think rationally.

“
They cannot afford a war. They have no evidence to use against us on the world stage. They are posturing. If they have something in mind, we will wait to see what it is and act accordingly. Who does that pipsqueak think he is giving the President of All the Russias orders
?”

President Willets called the DCIA on his secure personal line.

“This is NI One [The designation of POTUS as the commander-in-chief of the intelligence services as well as of the armed forces of the United States]. Andrew, please initiate the first phase of the cyber intervention.”

“Yes, Sir. It will be done.”

Fifteen minutes later, President Tikhondnko received an urgent conference call from Colonel General Yevgeni Mitrokhin, Director of the SVR [Foreign Intelligence Service], Michael Levinovich Ledvinov, Director of the MVD [Ministry of Internal Affairs], and General Ivan Petrovsky-Yugantsev, Supreme Commander-in-Chief of the Armed Forces of the Russian Federation.

Gen. Petrovsky-Yugantsev was the spokesman, “Comrade Chairman, we have been the victim of an extremely potent cyber-attack. Our electronic communications systems are all nonfunctional. We are calling you from the Old Veterans Club in central Moscow because our secure official lines do not work. We cannot prove it, but either the Chinese or the Americans are responsible. We are trying to identify which but without success as yet. Shall we launch a counter attack; and if so, at whom?”

“Do nothing and be patient for now. I am quite certain who did this. Let us wait a bit and learn.”

Fifteen minutes after that, the lesson was intensified. Every financial apparatchik in Tikhondnko’s administration called the president’s office. The reports were all the same: “We have had a complete melt-down of our computer system.”

Tikhondnko sighed and arranged for a call on the red phone. To his fury, he was informed that the President of the United States was busy on another call on that line and would he please hold until the president could get back to him.

“I hold for no man,” Tikhondnko screamed and slammed down his receiver.

On the other end, the red phone was indeed busy. President Willets was talking to PRC Chairman Liew Bao-Zhi in Beijing.

“Thank you for taking my call, Mr. Chairman. As you no doubt are already informed, I am calling about a serious matter and wish to ask your further help. My nation is grateful for what you have already done for us. Our problems have escalated and now we have fairly concrete evidence that our financial systems have been compromised—more accurately, attacked—by elements of the Russian Federation, and our stock markets are in free fall. We estimate our losses to be nearly a trillion U.S. dollars, and there is no end in sight. This attack—of course—affects you and your investments in the United States as well. We have taken countermeasures which we believe will be effective, but before we can improve our current condition, we are going to need a massive infusion of cash.”

“I believe such an amount would be most difficult for us to add to your already extraordinary indebtedness to us, Mr. President. We simply cannot extend further credit, despite my truly genuine desire to help.”

“I believe we can reach an accommodation, Chairman Liew. What I propose is that you begin the process of transferring funds to our financial trading institutions, and I will arrange today to have a full trillion dollars plus 10% interest in gold bullion transferred from Fort Knox before the close of business today. Can we operate from a relationship of trust, my friend?”

“We can. As soon as we hang up, I will make the cash flow from our end.”

“And I will begin filling the Chinese ship of your choice with gold bullion as soon as I am off the line.”

“Done,” Chairman Liew said.

President Willets chose not to call the Russian president back. Instead he called Treasury Secretary Richard Pennyweight.

“Richard,”

“Yes, Mr. President?”

“Begin immediately to transfer the gold bullion to the Chinese freighter. Chairman Liew’s office will call you shortly to let you know the correct ship. The shipment must get underway today. I know that such a movement of funds will attract public interest because of the huge army security force that will have to accompany it, but try and keep as much of the transaction as secret as you can.”

“Yes, Sir. I will make it happen.”

President Tikhondnko received two more disturbing calls. The first was from Colonel General Mitrokhin, Director of the SVR.

“Comrade President, you need to know that the Chinese have made a wire transfer of a trillion U.S. dollars to shore up the falling stock markets there. In addition, almost every agent of Zaslavsky’s in the U.S. has been rounded up; and for all practical purposes, the attack on the U.S. financial institutions has failed and is over.”

“Thank you, Comrade General.”

The second call came a minute later. It was from the mayor of Moscow.

“Mr. President, I have learned from the security forces that the armed forces’ computer systems are shut down. A minute ago, our street light computer control system went completely berserk. It is beyond chaos in the inner city; it’s mayhem. What can be done about this catastrophe?”

“I will deal with it, Mayor Rasniski.”

Tikhondnko swallowed his pride and had his secretary call on the red phone one more time.

“I regret to inform you that there will be a short delay before the president can take your call, Mr. President. He has asked me to inform you that he is dealing with a national security issue which should be brief, and he will be back with you in a very few minutes. He asked that you hold for him.”

Tikhondnko resigned himself to the idea that the U.S. had gained the upper hand; and he would have to be patient; and worse, he would have to ask for a cessation of the escalating hostilities before the two superpowers began shooting real bullets.

President Willets was on the line with the Secretary of the Treasury and with the DCIA discussing the news of the Chinese infusion of cash and the fact that their cyber-attack on Russia was having a desirable affect. He congratulated his subordinates on their prompt responses then had his secretary get him on the line with Tikhondnko.

“I am sorry to keep you waiting, Afonasii Glebovich. It was truly unavoidable under the very trying circumstances I am facing. What is it that I can do for you?”

“I believe it has come down to what can each of us do for the other,” President Tikhondnko said, straining to keep his voice calm and his communication civil.

“You called me, Mr. President. Perhaps you should take the lead.”

“I suppose that would be best. We admit nothing; but in the interest of our continuing cordial national relations, I will see what I can do about correcting whatever the criminal organizations in our country are up to. Will you terminate your cybertage before things escalate out of control?”

“I am not aware of any kind of cybertage against your great nation, Afonasii Glebovich; but, like you, I will do my best to see if such an outrage is emanating from my country. We certainly do not want further aggressive agendas to be implemented. As we make progress, it would be best for us to call each other again with a progress report once we have been able complete an emergency investigation. Please let me know what comes of your communication with Zaslavsky.”

Tikhondnko seethed at the presumption of the American president, but knew that he was dead-on accurate; so, he made no protest. As soon as the two presidents finished there call, he had his secretary contact Leonid Zaslavsky at his home office on Paradise Ponds.

“Mr. President, to what do I owe this honor?” the crime syndicate czar answered.

“There’s no time for informalities, Leonid. The U.S. has responded to an intolerable degree against your adventurism towards their financial markets. They have—for all practical purposes—shut down the military, the government, and the communications and transportation systems of our country. President Willets has informed me that they can do more. We really do not want more. It is not in our interests to continue to turn a blind eye and a deaf ear to your attacks in the U.S. You will do that because it is in the best interest of your organization to do so; and it is in our mutual best interest not to have this matter escalate between us.”

Zaslavsky was not used to being threatened by anyone, not even the president of all the Russias; but he was a practical man; so, his reply was conciliatory.

“All right, Mr. President, because you have had the courtesy to call me personally and to avoid casting blame, I will make the current activities of the
Solntsevskaya Bratva
cease. You have my word.”

“Thank you friend, Leonid. I trust that this mutual agreement between us will allow us to deal with each other in a mutually beneficial fashion in the future.”

After he and the president disconnected from each other, Zaslavsky said to himself with gritted teeth, “
Those arrogant Americans have not heard the last of this. They will regret the day they disrespected the Solntsevskaya Bratva
.”

He sent for Ivan Droskovsky who had a special skill set that he needed.