Hacker-Aided Insider Trading Ring Nets $100 Million

Insider Trading
Insider Trading. Credit: Insider Monkey

What do you get when you bring a Ukrainian cyber-criminal gang and crooked Wall Street stock traders, together? A $100 million racket of illegal profits due to an insider trading ring.

It was a milestone event for malicious hackers. A unique insider trading ring had American stock market traders and Ukrainian hackers team up to steal (hack) thousands of unpublished corporate press releases, Reuters reports. The result of said trading ring? A staggering $100 million in illegal profits, over five years.

A press release from FBI’s New York field office screamed:

Largest Known Computer Hacking and Securities Fraud Scheme

Also read: Feds To Charge Hackers Who Stole Merger Info

Nine people linked to the insider-trading scheme have been charged by prosecutors. Scalping yet another landmark, the criminal charges are the first of their kind for a securities fraud scheme that is directly related to hacked insider information.  Altogether, a lawsuit filed by the U.S. Securities and Exchange Commission bringing civil charges named:

  • 9 individuals from New Jersey and New York City
  • 17 individuals in Russia, Ukraine, and the US.
  • 15 companies in the U.S., Malta, Russia, France and Cyprus.

All of the above are said to have profited from the elaborate insider scheme, according to a report from the Associated Press.

A One-of-a-kind Insider Trading Ring. One to Spur Many?

press releases“This is the story of a traditional securities fraud scheme with a twist – one that employed a contemporary approach to a conventional crime,” remarked Diego Rodriguez, FBI Assistant Director-in-Charge at a news conference.

Over 150,000 press releases that were to be issued by prominent wire agencies such as PR Newswire in New York; Business Wire of San Francisco; and Marketwired at Toronto were stolen by Ukrainian hackers, starting in 2010.

Here’s how the scheme played out:

  • The accused stock-traders started by looking into roughly 800 of the hacked new releases to make quick trades before the information came out, through a press release.
  • Positive news in the form of good quarterly earnings reports can hike a company’s stock. Bad news and the stock takes a fall. By being privy to such crucial information early, the conspirators were then able to correctly ‘bet’ on a stock, by being in on the secret.
  • In 2013, hackers stole the press release from Panera Bread Company which announced that its earnings projections were being lowered. The hacking-trading ring bet correctly the stock would fall before the news came out. Sure enough, they turned a cool $1 million profit, a day later.

For their endeavors in the operation, the Ukrainian hackers were routinely cut in on the profits, prosecutors noted.

This case illustrates how cyber criminals and those who commit securities fraud are evolving and becoming more sophisticated,

said U.S. Attorney Paul Fishman speaking in New Jersey.

The hackers were relentless and they were patient.

Insider Trading image from Insider Trading 3, featured image from Shutterstock.

Samburaj is the contributing editor at Hacked and keeps tabs on science, technology and cyber security.