Group made $30M with hacked press release information

Arrest warrants were issued for four others in Ukraine.

The news releases contained earnings figures and other corporate information which was yet to be officially announced.

Prosecutors say they took part in the scheme to use information stolen from PR Newsire, Business Wire and Marketwired. Money was then shifted offshore through Estonian banks, according to one of two federal indictments unsealed Tuesday.

Financial sector officials count hacks that threaten the confidence of the markets and trades among their largest fears.

At a news conference Tuesday, the U.S. attorney for New Jersey, Paul Fishman, called the incident “a broad-ranging, cutting edge global scheme at the intersection of hacking and securities fraud”.

The team would pose as outside consultants, tricking employees into disclosing confidential information or granting them access to a company’s network.

Its also a great equalizer. It’s also a great weapon, as advance information can be extracted from companies without the need to have longstanding Wall Street connections.

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.

Among those charged is a money manager from Glen Mills.

Prosecutors in Brooklyn announced the insider trading indictment charging Korchevsky and three other traders: Vladislav Khalupsky, of Brooklyn and Odessa, Ukraine; and Leonid Momotok and Alexander Garkusha, both of Georgia.

In another instance, a defendant sent 96 stolen news releases to someone with a subject, in Russian, that read “fresh stuff”.

“The reality, as exemplified by today’s charges, is that hackers can obtain access to all sorts of valuable information and can and will profit off of it in every way imaginable”, he added. Acting Brooklyn U.S. Attorney Kelly Currie said $ 5.4 million in Mr. Korchevsky’s trading accounts were seized Tuesday.

Caterpillar’s news release was publicly distributed on January 26, 2012.

The stock rose 2 percent from $109.05 to $111.31 that day. “The traders were financially savvy, using equities and options … to maximise their profits”.

They appear to have little or no financial credentials or obvious experience as traders. They include themselves in construction businesses and myriad real estate.

The nine defendants extend across two or perhaps three countries.

The investigation has been in the works for several years, and federal agents began making arrests on Tuesday. In addition to the nine men, additional defendants included companies affiliated with them, foreign nationals, hedge funds and firms, most of which are based in Moscow. It said that overall the crime resulted in more than $100m (€90m) of illegal profit.

Five arrests were made this morning, Reuters reported citing an Federal Bureau of Investigation spokesperson. The criminals have now gone beyond the ever-more aggressive tactics like wiretaps deployed by prosecutors to restrain illegal trading with a simple trick by stealing information as an alternative to convince others to share it incorrectly. This allowed the schemers to make trades on them before the deals became public.

Business Wire said in a statement it was cooperating fully with authorities and had hired a cybersecurity firm to test its systems. PR Newswire and Marketwired did not have an immediate comment on the indictments. “Be vigilant in protecting your systems, taking measures to detect and guard against hacking, and working together with law enforcement to uncover the theft and misuse of stolen information”.