[ISN] This Ex-Hacker's Fat Is in the Fire

From: InfoSec News (isnat_private)
Date: Thu Apr 11 2002 - 00:56:21 PDT

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    APRIL 11, 2002 
    By Jack Ewing 
    The escapades of larger-than-life German Netrepreneur Kim Schmitz made 
    him a cult figure. Now they've landed him in jail 
    Eight months before the indictment, Kim Schmitz saw it coming. As 
    German authorities closed in on the one-time hacker and Internet 
    entrepreneur, he threw one last blow-out party in May, 2001 -- 
    immortalizing the revelry with digital photos posted on his Web site. 
    Schmitz and entourage headed off to Monaco from Munich in a fleet of 
    rented sports cars, booked a pair of huge yachts, and invited a bevy 
    of attractive women in bikinis to join them. The champagne alone cost 
    $40,000, Schmitz boasted on his Web site. 
    It was all very much in character for the self-described "330-pound 
    loudmouth" (see BW Online, 3/7/01, "The Ex-Hacker Who Would Be Tech 
    King"). Yet, in a rare moment of contemplation, Schmitz, 28, headed to 
    the top of a mountain overlooking the Mediterranean and posed for the 
    digital camera while gazing from the window of an abandoned stone hut. 
    He explained on his Web site that the grim stone structure could be 
    his next office -- except the bars were missing. 
    PUMP AND DUMP?  Not anymore. Since January, when German authorities 
    finally tracked Schmitz down and extradited him from Thailand, he has 
    been sitting in jail near Munich awaiting trial on insider-trading 
    charges. As you might expect from a guy who says his goals include 
    forming his own political party and starring as the evil genius in a 
    James Bond movie, these aren't just any insider-trading charges. 
    Munich prosecutors allege that Schmitz bought shares worth $327,000 in 
    letsbuyit.com, a retail site where buyers pool their purchasing power 
    in a kind of online cooperative, on the same day he told the company 
    he was ready to put up money to help it avoid insolvency. When the 
    letsbuyit.com made Schmitz's pledge public a day later, prosecutors 
    say, the shares shot from 25 euro cents on Frankfurt's Neuer Markt to 
    60 cents. Schmitz then sold his stake for a profit of some $1 million 
    -- a sum that probably makes it the largest insider-trading case in 
    German history, authorities say. 
    Granted, it's a pretty short history: Insider trading was legal in 
    Germany until 1995. Convictions are rare, and no one has ever done 
    prison time for an insider-trading conviction, though defendants have 
    received suspended sentences. 
    DAY IN COURT.  Could Schmitz be the first? That's an interesting 
    question. Last year, a German TV journalist was acquitted of insider 
    trading after he recommended that viewers buy a stock he had himself 
    purchased days earlier. But the judge ruled there was no proof the 
    journalist planned in advance to recommend the shares. Schmitz is 
    likely to rely on similar legal theory when he faces trial, set for 
    late April, 2002, or early May. Schmitz's lawyer, Thomas Pfister, 
    argues that his client's actions were no different than banks that 
    deal in the shares their analysts recommend. 
    Judges rarely imprison defendants on the first offense. But Schmitz 
    isn't a first-time offender. He was detained in 1994 on charges 
    stemming from accusations that, among other things, he and accomplices 
    used stolen AT&T and MCI phone-card numbers to make hundreds of calls 
    to bogus offshore "chat services" they operated themselves. The chat 
    services collected a portion of the phone tolls, which were billed to 
    unsuspecting AT&T customers, authorities say. Convicted of computer 
    fraud, Schmitz received a suspended two-year sentence. 
    Whatever the judicial outcome of Schmitz's latest legal troubles, it 
    has temporarily stalled his entrepreneurial career, such as it was. It 
    was never totally clear how seriously to take his various business 
    ventures, which included a company that equips cars for mobile 
    Internet access. 
    TROUBLE APLENTY.  In fact, Dusseldorf lawyer Klaus Dittke is pursuing 
    a separate complaint that accuses Schmitz of using false pretenses in 
    an alleged effort to lure investors for a startup incubator he called 
    Kimvestor. The complaint, on behalf of an investor-advocacy group, 
    claims that among other things, Schmitz falsely advertised that 
    Kimvestor's supervisory board included top executives from 
    DaimlerChrysler and Dresdner Bank, who in fact weren't involved. 
    (Schmitz, through his lawyer, disputes the accusations, saying they 
    are unfounded.) 
    Schmitz has, however, been remarkably successful at building his own 
    cyber-legend -- portraying himself as a hacker who made a fortune 
    advising others how to avoid becoming victims of computer crime. He 
    staged elaborate parties around the world, which were documented by 
    the likes of RTL, one of Germany's leading TV networks. Some in the 
    country's press corps took him half-seriously. He was once termed a 
    "super-brain" by Finanzen, a German finance magazine. "He's a highly 
    intelligent young man. It's really brilliant what he has achieved," 
    says Pfister, Schmitz's Munich-based defense lawyer. 
    Still, there has always been an element of farce in Schmitz's antics. 
    His Web site (www.kimble.org), which is still operating, veers between 
    self-promotion, self-pity, and self-parody. On the same page that 
    Schmitz seeks salesmen for the Kimvestor Equity Fund he also invites 
    girls (legal age) interested in experiencing his "humor, charm, 
    lifestyle, and friendship" to write him at his e-mail address. 
    KILLING TIME.  Schmitz can be mawkish, too. He has made public threats 
    of suicide. In January, around the time of his latest indictment, he 
    issued a "farewell letter" in which he claimed that Germany was 
    hostile to geniuses such as himself and announced that he would be 
    leaving the country. He was arrested in Thailand and extradited to 
    Germany on Jan. 21. 
    As he waits for trial behind bars, Schmitz's braggadocio seems to be 
    intact. He has told visitors that he won the warden's twin daughters 
    in a poker game. And he has writing his memoirs, provisionally 
    entitled, Life in the Passing Lane. 
    If Schmitz achieved one thing, it may have been to take the absurdity 
    inherent in the dot-com craze and elevate it to high comedy. That may 
    explain why some Germans still consider him a folk hero. "He's as 
    famous as the Chancellor. He has really achieved something in life," 
    raves Sascha Wemmel, a 29-year-old mobile-phone salesman from Hanover 
    who operates a fan site (www.kim-schmitz.de). Just don't lend Schmitz 
    your credit card. 
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