The Securities and Exchange Commission (SEC) last month announced bringing charges against tens of individuals and companies allegedly involved in an illegal trading scheme. Two of the defendants have agreed to pay $30 million to settle the charges.
The SEC revealed in August that a cybercriminal group led by Ukrainian nationals Ivan Turchynov and Oleksandr Ieremenko hacked into the systems of newswire services Marketwired, PR Newswire and Business Wire in an effort to steal unreleased corporate earnings announcements that would be highly valuable for making profitable financial trades. The stolen data was transmitted via a website to traders in the U.S., Russia, Ukraine, Malta, France, and Cyprus.
The scheme is believed to have generated more than $100 million in illegal profits based on roughly 150,000 press releases stolen between 2010 and 2015. The hackers reportedly gained access to the valuable information after stealing the login credentials of newswire employees and planting malware on the targeted systems.
In one example provided by SEC, the hackers and traders managed to make over half a million dollars after getting their hands on a negative earnings report 36 minutes before it was released to the public.
SEC announced charging 34 defendants with violating federal antifraud laws and related SEC antifraud rules. Two of the charged traders, Ukrainian-based Jaspen Capital Partners Limited and CEO Andriy Supranonok, have agreed to return $30 million of the profit that was allegedly obtained illegally.
Jaspen and Supranonok haven’t denied or admitted the allegations that they made roughly $25 million buying and selling contracts-for-differences (CFDs) based on illegally obtained press releases. It’s worth noting that earnings information obtained before its public release can be highly valuable for CFD transactions, in which traders place bets on the direction of a stock’s price movement.
“Barely a month after we froze tens of millions of dollars in illegal profits from the defendants’ trading on illegal inside information obtained from hacked news releases, we obtained a settlement with foreign traders that deprives them of their wrongful gains,” commented Andrew J. Ceresney, Director of the SEC’s Enforcement Division. “Today’s settlement demonstrates that even those beyond our borders who trade on stolen nonpublic information and use complex instruments in an attempt to avoid detection will ultimately be caught.”
In addition to the SEC’s civil case, the United States Department of Justice announced charges against nine people who allegedly made $30 million using information stolen from newswires. Five of them, residing in the US states of Pennsylvania, New York and Georgia, have been arrested. International arrest warrants have been issued for the other defendants, who are located in Ukraine.