SEC Brings Charges in $100 Million Newswire Hacking Scheme
The US Securities and Exchange Commission (SEC) has brought charges against nine new defendants involved in an international scheme that saw newswires that distribute corporate press releases hacked to facilitate an insider trading ring.
In a complaint filed in the US District Court in New Jersey on Wednesday, five traders and the four companies they owned are alleged by the SEC to make nearly $20 million in illegal profits by insider trading, Reuters revealed.
Hacked reported the crime that came to light in August 2015, wherein hackers based in Ukraine and crooked Wall Street traders came together to form an insider trading ring that is speculated to have generated $100 million in profits.
Nine defendants were charged at the time, all from New Jersey and New York City while another 17 individuals from Russia, Ukraine and the US also saw civil charges filed against them. Altogether, 15 companies in the US, Malta, Russia, France and Cyprus are also said to have profited.
In totality, a staggering 150,000 press releases issued by prominent wire agencies including PR Newswire in New York; Business Wire of San Francisco and Marketwired from Toronto were all targeted. The thefts also included information such as quarterly results of companies between 2010 and 2014, the SEC charges revealed.
The nine new defendants’ companies are revealed to be located in Belize, Dominica, Panama and the Seychelles, going to show the wide-reaching scheme of the newswire hacking.
The hacking scheme began when stock-traders gained access to about 800 press releases which hadn’t been released yet. Quick trades were made before the information got out. Basically, positive news such as good quarterly earnings usually tends to spike a company’s stock. Lowered earnings and stock takes a fall.
In being privy to such information, the traders would know bet for or against a stock, while projecting the outcome of its trajectory following the press release. In one particular example, the Ukrainian hackers stole the press release from Panera Bread Company, which was due to announce that its earnings projections were being lowered. The trading ring bet that the stock would fall, prior to the news coming out. A day later, the hacker-trader group pulled in a million dollars in profit.
As things stand, at least 42 defendants, including traders in other countries now face SEC civil charges.
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