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SEC, FBI Bust Hacking Ring That Stole Earnings Reports Then Sold Them

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The Securities and Exchange Commission along with the FBI and other federal agencies on Tuesday busted an international hacking operation that stole unpublished earnings information on publicly traded companies from two newswire services and then conducted insider trades on the confidential information.

The hackers, based in the Ukraine, stole more than 100,000 press releases over a five-year period and reaped $100 million in illicit profits by passing the confidential information to a ring of traders located in the United States and abroad.

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. Also charged were 30 other defendants inside and outside the U.S. who authorities say traded on the nonpublic earnings information in the releases.

The SEC’s complaint unsealed Tuesday was filed under seal on Monday in U.S. District Court in Newark, N.J., and the court that day entered an asset freeze and other preliminary relief.

“This international scheme is unprecedented in terms of the scope of the hacking, the number of traders, the number of securities traded and profits generated,” said SEC Chairwoman Mary Jo White, in a statement. “These hackers and traders are charged with reaping more than $100 million in illicit profits by stealing nonpublic information and trading based on that information. That deception ends today as we have exposed their fraudulent scheme and frozen their assets.”

The SEC charges that over a five-year period, Turchynov and Ieremenko spearheaded the scheme, using advanced techniques to hack into two or more newswire services and steal hundreds of corporate earnings announcements before the newswires released them publicly. The SEC further charges that Turchynov and Ieremenko created a secret web-based location to transmit the stolen data to traders in Russia, the Ukraine, Malta, Cyprus, France, and three U.S. states–Georgia, New York and Pennsylvania.

According to the SEC’s complaint, the network of traders paid the hackers for the confidential information either “through a flat fee or a percentage of the illicit profits gained from the illegal trading on the information.”

In parallel actions, the U.S. Attorney’s Office for the District of New Jersey and the U.S. Attorney’s Office for the Eastern District of New York announced criminal charges against several of the defendants in the SEC’s action, including Turchynov and Ieremenko, and traders in the U.S. and Ukraine–Arkadiy Dubovoy, Igor Dubovoy, Pavel Dubovoy, Vitaly Korchevsky, Vladislav Khalupsky, Aleksandr Garkusha and Leonid Momotok.

According to the SEC’s complaint, the hackers, Ivan Turchynov and Oleksandr Ieremenko spearheaded the scheme and stole the press releases and passed them to the trader defendants in the window of time between when the press releases were uploaded to the newswire service’s systems and when the press releases were publicly issued.

As a result, the complaint said the traders “had an unfair trading advantage over the other market participants because they knew the content of the press release before the information was publicly announced.”

The SEC further charges that Turchynov and Ieremenko created a secret web-based location to transmit the stolen data to traders in Russia, the Ukraine, Malta, Cyprus, France, and three U.S. states, Georgia, New York and Pennsylvania. 

The traders, the complaint states, “bought or sold securities based on their anticipation of how the market would respond to the information” in the stolen press releases and “concealed their trading activities through use of multiple accounts and entities.”

At least some of the traders have continued to pursue the scheme, with some of them, as recently as May 2015, “trading in front of press releases” to be issued by a third newswire service.

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