SEC breaks up insider trading scheme linked to hackers

And that was just one success of many, if the SEC’s claims are true: the charges allege that the crooks made more than $100,000,000 over five years by following this hack-steal-trade-profit process. A network of traders in the U.S. made the illegal trades, paying the hackers for the information with either a flat rate or a percentage of the profits, the indictments said.

According to the SEC, the traders had only a short window of opportunity to place illicit trades in the stocks, options, and other securities using the stolen nonpublic information.

According to sources close to the investigation, some of the individuals charged in the scheme were arrested by the FBI Tuesday morning, while others-including hackers located in Ukraine-have not been apprehended.

Those charged include two Ukrainian men, Ivan Turchynov and Oleksandr Ieremenko, who allegedly hacked into newswire services to steal the releases before they were sent out by the wire services. In one particularly dramatic instance on May 1, 2013, the hackers and traders allegedly moved in the 36-minute period between a newswire’s receipt and release of an announcement that a company was revising its earnings and revenue projections downward.

The U.S. Attorney’s Office for the District of New Jersey and Eastern District of New York also filed parallel criminal charges against the 32 defendants in the SEC action. The stolen information was allegedly transmitted over the Internet to traders in Russian Federation, Ukraine, Malta, Cypyrus, France and the three U.S. states of Georgia, New York and Pennsylvania.

When a publicly-traded company announces to the world that it isn’t going to meet its earnings forecast, its share price usually goes off the boil a bit, as investors sell off shares.

U.S. authorities have arrested five suspected insider traders with links to hackers in Ukraine. “Despite extreme vigilance and commitment, recent events illustrate that no one is immune to the highly sophisticated illegal cyber-intrusions that are plaguing every aspect of our society”, said BW CEO Cathy Baron Tamraz, who noted the company conducts multiple security audits annually.

SEC chair Mary Jo White called the scheme “unprecedented in terms of the scope of the hacking, the number of traders, the number of securities traded and profits generated”. If an employee fell for the ruse, the hackers could download the newswires’ news releases and put them on an overseas server. That refers to gaining unauthorized access to a computer network by using a series of structured query language commands.

Among the victimized news wires were Business Wire, Marketwired LP and PR Newswire Assn.

The other individuals charged criminally are Vladislav Khalupsky, 44, a former broker-dealer; and two Georgia residents, Leonid Momotok, 47, and Alexander Garkusha, 47.

According to the prosecution, the hackers broke into newswire services to find the information required to commit fraud, stealing information from thousands of corporate press releases before they were released to the public and providing it to the insider trading ring.

The proceeds were allegedly shifted offshore through Estonian banks.