The Securities and Exchange Commission has filed financial fraud charges against 32 defendants accused of insider trading by using information obtained from newswire services that were hacked. Two Ukrainians and 30 other defendants in the U.S. and abroad are accused of making $100 million in illegal gains.
According to the regulator, for about five years, Oleksandr Ieremenko and Ivan Turchynov, both from Ukraine, hacked in to at least two newswire services and stole hundreds of corporate earnings announcements before they were issued to the public. Bloomberg says the services are Business Wire, Marketwired, and PRNewswire Association LLC.
The suspected hackers are accused of grabbing over 150,000 news releases that allowed them to anticipate movements in the stock market and make trades that would turn a profit. They also purportedly set up a secret web-based location to transmit the stolen information to traders in numerous countries and U.S. states.
The two men are accused of concealing intrusions with proxy servers to hide their identities and pretending to be newswire service employees and customers. Turchynov and Ieremenko are also accused of using a video highlighting the theft of the earnings data prior to public release to recruit traders.
These traders allegedly used the information to make illicit trades in options, stocks, and other securities. They sold and bought shares in a number of companies, including Oracle Corp., Hewlett-Packard Co., Panera Bread Co., and others.
The traders purportedly sent part of the illegal profits they made to Ieremenko and Turchynov. They also are accused of trying to hide their illegal activity by setting up different accounts under numerous names and sending money that were supposedly payments for building and construction equipment to hackers.
SEC Chair Mary Jo White called the international scam unprecedented in scope as it pertains to the kind of hacking involved, the number of traders that were allegedly part of the scam, the quantity of securities they traded in the scheme, and the money made. White said that the defendants’ assets have been frozen.
In an example of how the traders and hackers purportedly worked together, according to the SEC, they would use a short period of time to get the information and make the trades. For example, on May 1, 2013, within the 36 minutes from the time that a newswire service received an announcement about one company modifying its earnings and revenue projections downward and the service issuing the announcement to the public, the traders started selling stock short, as well as contracts for difference (CFDs). From these transactions alone they made $511,000 after the announcement finally was made public.
Meantime, prosecutors in New York and New Jersey have filed a parallel criminal action against the Ukrainian hackers and traders in the US and Ukraine. Federal agents in Pennsylvania and Georgia arrested some of the traders. Other traders who have been indicted are still free.
Read the SEC Complaint (PDF)
Nine People Charged In Largest Known Computer Hacking And Securities Fraud Scheme, Justice.Gov, August 11, 2015