The US Securities and Exchange Commission (SEC) has charged 32 people with violating anti-fraud laws for their involvement in a scheme to profit from non-public corporate earnings announcements.
Two men allegedly hacked in to newswire services in order to gain information on corporate earnings that were not yet publicly released. The other 30 defendants are charged with trading on this stolen information, generating a total of $100 million in illegal profits.
The US Attorney’s Office for the District of New Jersey and the US Attorney’s Office for the Eastern District of New York have also launched criminal investigations, and the US District Court in Newark issued an asset freeze on 10 August.
It is alleged that over a five-year period two hackers, Ivan Turchynov and Oleksandr Ieremenko, gained access to at least two newswire services using proxy servers to pose as employees and clients.
They allegedly stole corporate earnings announcements before they were released and distributed the information through a secure web location to traders in Russia, Ukraine, Malta, Cyprus, France and US states Georgia, New York and Pennsylvania.
The traders are charged with purchasing stocks, options and other securities in the small window before the releases were made public, anticipated changes in the market. In some cases they may have funnelled a portion of the profits back to the hackers, who took an agreed percentage of the earnings.
All defendants are charged with violating federal anti-fraud laws and related SEC anti-fraud rules, and the SEC is seeking a final judgement that would require the defendants to pay penalties and return the profits with prejudgement interest.
Chair of the SEC Mary Jo White said: “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.”
She added: “These hackers and traders are charged with reaping more than $100 million in illicit profits by stealing non-public information and trading based on that information. That deception ends today as we have exposed their fraudulent scheme and frozen their assets.”
Andrew Ceresney, director of the SEC’s division of enforcement, also commented: “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.”
