E*Trade Left Him Twisting In The Wind
The trouble all began one day in the middle of July. Chris Ring sat down at the computer in his living room, went to Yahoo! Classifieds, and posted an ad to sell his Sony laptop. Just like that, he had a buyer, a Carlstadt (N.J.) student named Phillip Tang. By phone, Ring agreed to send the Sony via FedEx in exchange for a $2,775 cashier's check. He got the check in two days, but it would take him three weeks to learn that it was bogus--as was "Phillip Tang," a pseudonymous cybercrook who has eluded the police for months.
Ring is a 54-year-old digital photographer, a native South African with graying hair and a faint smile. "I am still furious," he told me as we sat recently in his apartment near Rock Creek Park in Washington, D.C. Internet crime is rising, but that's not why Ring is mad. It's what came next.
Unwittingly, Ring deposited the bogus check in one of his two modest accounts at E*Trade, where he was an active client. On the morning of Aug. 1, he was trading a hot biotech stock, Lexicon Genetics. A little blue box suddenly popped onto his computer screen. "This account," it declared, "is not approved for trading." He tried again to trade. Again, the blue box. Next, Ring clicked back to his account home page. There, he nearly died. "My balances had just disappeared. There was no money. There were no positions. There was nothing. I said to myself: `Obviously, there must be a problem at E*Trade."'
So he phoned customer service. A long wait on hold later, he was told only that E*Trade's corporate security unit would contact him that day. It didn't. Ring said he called back the next day and got the same treatment. After two days, no explanation. "I called again the next morning, and I was absolutely frothing," Ring said. That afternoon, an E*Trade rep finally phoned. She told him his accounts were closed and his funds frozen for 45 days. Ring said she gave no reason beyond an oblique reference to a cashier's check.
CYBERKAFKA. Frantic, Ring phoned Manhattan's Chinatown Federal Savings Bank, whose name was on the cashier's check. The bank's operations manager, Stephen Lau, told Ring that he was only one of many victims of the scam and that the Federal Bureau of Investigation had been on the case since early this year. Ring called the FBI, both the Carlstadt and his local police, and FedEx. Then, he called and e-mailed E*Trade to share what he'd learned. Yet that cut no ice: His accounts stayed closed. He says one E*Trade rep, unable to help, even suggested he complain to the Securities & Exchange Commission. "I was feeling so powerless. I thought: `I give up. There's nothing I can do. They'll just keep stonewalling me.' It was very Kafkaesque."
Disconsolate days went by before Ring looked for help online. He found two sites (table) devoted to online investors' woes. Eventually, he contacted BUSINESS WEEK. On Aug. 22, I called E*Trade to see if Ring's story had merit. The next day, E*Trade spokesman Patrick Di Chiro told me that it was, regrettably, true. Once E*Trade heard the FBI was investigating checks on Chinatown Federal, "we had to freeze the accounts," Di Chiro said, whether Ring was a suspect or not. That no one told Ring why, he added, was "a failure of internal communication." On Aug. 24, E*Trade reinstated Ring's accounts and apologized. "This was completely unintended," Di Chiro said. "We'd like to gain back his loyalty."
Ring now is looking at other online brokers, but he's dubious. "All of them have got holes in their systems. Their information is wrong, or the executions are slow, or the networks break down," he told me. "You find out that your money can go into Never Never Land." If you trade online, what are the odds your money might fly off for a three-week trip with Peter Pan? Very low. At a respectable firm, they should be zero.
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