An international group of hackers and traders in the U.S. and Ukraine have been charged with felony counts of securities fraud, computer fraud and conspiracy for hacking into the databases of business newswires to access corporate information before it was released and then trading on that information.
In addition, the U.S. Securities and Exchange Commission has brought related civil charges against the nine indicted on criminal charges as well as another 23 individuals and companies.
SEC chair Mary Jo White said that the scheme was the largest of its kind ever prosecuted “in terms of the scope of the hacking at issue, the number of traders involved, the number of securities unlawfully traded and the amount of profits generated.”
It is estimated that the nine individuals facing criminal charges — two Ukrainian-based hackers, six U.S.-based traders and one overseas trader — made $30 million from the scheme.
The SEC said its civil suit involves the nine alleged criminal defendants as well as 17 individuals and 15 companies in the U.S., Russia, Ukraine, France, Malta and Cyprus.
Prosecutors allege that the insider trading scheme began in 2010 and continued until May 2015. Hackers allegedly gained access to the press release files at PR Newswire in New York, Business Wire in San Francisco and Marketwired in Toronto. The accused then allegedly used earnings information from those press releases to trade the stocks of companies that were set to report positive news. Once the news was released publicly and a company's stock rose, the traders then sold the stock for a profit.
According to authorities, the group allegedly traded more than 75,000 shares of Panera Bread Co. stock in 2013 and made $900,000 within an hour. Prosecutors also allege that hackers accessed a Caterpillar Inc. earnings release in January 2012 announcing a 36% rise in after-tax profits. Traders then allegedly purchased more than $8.3 million of Caterpillar stock and made a $1 million profit by selling it after the earnings release was made public.
The Cogdell Law Firm is a boutique law firm focusing on large, complex business and criminal financial-related litigation, including white collar criminal defense, securities fraud, health care fraud investigation, criminal appeals and state criminal defense. When results matter most, contact Dan Cogdell at (713) 426-2244 or [email protected]
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