Federal prosecutors have charged nine people in an insider trading ring that lifted information from corporate press releases before they were made public. The Securities and Exchange Commission said related illegal trading netted more than $100 million.
US prosecutors claimed hacks instigated by nine people — five of whom have already been arrested by the FBI — resulted in rewards of around $30 million. The lawsuit brought by the US Securities and Exchange Commission has alleged that 32 people in and outside the US were involved, raking in more than $100 million in illegal gains. The scheme is the largest known suspected case of hacking that resulted in insider trading.
Beginning in early 2010, hackers invaded networks of press release distribution sites Business Wire, MarketWired, and PR Newswire, according to federal authorities.
he contents of corporate press releases, which included valuable market information, were then given to traders who acted on the stolen data, the indictment said. Foreign shell companies were used to distribute the resulting monetary gains.
Federal prosecutors in Brooklyn, New York indicted four men for insider trading in the case, including: Vitaly Korchevsky, a former hedge fund manager from Glen Mills, Pennsylvania; Vladislav Khalupsky, of Brooklyn and Odessa, Ukraine; and Leonid Momotok and Alexander Garkusha of Georgia, Reuters reported.
In New Jersey, a federal indictment charged Ivan Turchynov and Oleksandr Ieremenko, two accused computer hackers from Ukraine; Pavel Dubovoy, a trader from Ukraine; and Arkadiy Dubovoy and his son Igor Dubovoy, traders from Georgia.
The defendants face charges such as securities fraud and conspiracies to commit securities fraud, wire fraud and money laundering.
A related civil lawsuit initiated by the SEC charged even more defendants. The suit alleged that the illegal trading netted more than $100 million. The SEC said Turchynov and Ieremenko “spearheaded the scheme.”
“This cyber hacking scheme is one of the most intricate and sophisticated trading rings that we have ever seen, spanning the globe and involving dozens of individuals and entities,” said Andrew Ceresney, director of the SEC’s Division of Enforcement. “Our use of innovative analytical tools to find suspicious trading patterns and expose misconduct demonstrates that no trading scheme is beyond our ability to unwind.”
Companies involved in the hacks included Acme Packet Inc, Align Technology Inc, Caterpillar Inc, Dealertrack Technologies Inc, Dendreon Corp, Edwards Lifesciences Corp, Panera Bread Co., and Verisign Inc.
The criminal case is the first US prosecution that accused conspirators of using hacked inside information in their securities fraud plot, Reuters reported.