U.S. Attorneys’ offices in New York and New Jersey, along with the Securities and Exchange Commission (SEC), have filed over 20 charges against an international ring of hackers and traders accused of selling and buying unreleased business information. The group of hackers, mostly from the Ukraine and Russia, are suspected of taking advantage of security vulnerabilities in several business wire services, stealing up to 150,000 press-releases prior to the services making the information public, and then selling it to willing traders. The SEC estimates that the ring netted over $100 million from the information since the scheme first began in 2010. On Tuesday, federal officials issued indictments in New York and New Jersey against two alleged hackers and seven traders, and the SEC filed civil charges against 23 other individuals and corporations accused of being involved in the scheme. The indictment came as morning raids by the FBI in Georgia and Pennsylvania netted the arrests of five traders. The hackers indicted in the cases are currently suspected to be at large somewhere in the Ukraine.
In the indictment, federal authorities claim that the hackers infiltrated Berkshire Hathaway’s Business Wire, along with PRNewswire Association and Marketwired business information services. The hackers sold records involving over 100 companies, with the traders indicted by U.S. prosecutors executing over 1,000 “inside the window trades” through retail accounts. According to one of the indictments, the profits were then laundered offshore through financial institutions from Estonia and Macao. The scheme began in 2010 after the suspected hackers released a flashy video online with a picture of a computer tapping into a wire service, attracting the interest of traders in Pennsylvania, Georgia, and New York. A long-term relationship emerged from that point, according to U.S. authorities, eventually leading to the traders requesting a “shopping list” of information from companies that the traders suspected of making upcoming major moves. SEC Chair Mary Jo White credited new “enhanced trading surveillance” software designed to detect suspicious trading patterns as crucial to uncovering the longstanding scheme.
Navigating through proxy servers and fake employee accounts, the two suspected ringleaders of the hacking scheme are Ukrainians Oleksandr Ieremenko, 23, and Ivan Turchynov, 27. The pair, along with two traders suspected of being in the Ukraine as well, now has international arrest warrants pending. The suspected ringleader among the traders, and the only professional trader arrested on Tuesday, is Philadelphia-area resident Vitaly Korchevsky. Korchevsky is suspected of netting over $17.5 million in illegal profits himself, and taking part in massive gains including $1 million ahead of positive earnings forecasts for industrial giant Caterpillar in 2012, and a 2013 $8 million purchase of Align Technologies that netted the traders $1.4 million. SEC Chair White said the “brazen scheme was unprecedented in terms of the scope of the hacking, the number of traders involved, the number of securities unlawfully traded and the amount of profits generated.” White continued, “The traders were market-savvy, using equities and options to maximize their profits.” Among other companies traded by the ring include Boeing, Hewlett Packard, Oracle, and Panera Bread, among others.
Bloomberg – Keri Geiger
Wall Street Journal – Christopher M. Matthews and Nicole Hong
Washington Post – Drew Harwell