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SEC Settles With Two Traders Charged in EDGAR Hacking Case

The United States Securities and Exchange Commission (SEC) last week announced that it reached a settlement with two of the traders charged last year over their roles in a scheme that involved hacking the organization’s EDGAR electronic filing system.

The United States Securities and Exchange Commission (SEC) last week announced that it reached a settlement with two of the traders charged last year over their roles in a scheme that involved hacking the organization’s EDGAR electronic filing system.

The SEC revealed in September 2017 that a breach of its EDGAR system detected in 2016 had allowed hackers to obtain non-public information that was used by some traders to make a profit.

In January 2019, the SEC announced charges against nine defendants, including a Ukrainian hacker, two organizations, and six traders in the US, Ukraine and Russia. The agency noted at the time that some of them had also been involved in an operation that targeted newswire services and which generated over $100 million in illegal profits.

SEC settles with two traders over EDGAR hack

Between May and October 2016, traders used at least 157 earnings releases obtained from the EDGAR system to make a profit of more than $4.1 million.

The SEC said last week that it settled with two of the traders charged in January 2019, namely David Kwon from California and Igor Sabodakha from Ukraine.

As part of the settlement, the suspects have agreed to disgorge their profit and pay prejudgment interest. Kwon has agreed to pay $165,000, while Sabodakha will pay $148,000 representing illegal trade profits and prejudgment interest, and the same amount as a civil penalty. The settlement is subject to court approval.

When it announced the charges in 2019, the SEC said Kwon made a profit of roughly $400,000, while Sabodakha made nearly $70,000.

“As alleged in our complaint, the defendants engaged in an international scheme to obtain and use hacked information to enrich themselves,” said Joseph G. Sansone, head of the SEC’s Market Abuse Unit. “Today’s result reflects the SEC’s ability to investigate complex schemes conducted both here and abroad and to hold their perpetrators accountable.”

Related: Former Equifax CIO Charged With Insider Trading

Related: SEC Tells Execs Not to Trade While Investigating Security Incidents

Related: Hack of U.S. Regulator a Blow to Confidence in Financial System

Written By

Eduard Kovacs (@EduardKovacs) is a contributing editor at SecurityWeek. He worked as a high school IT teacher for two years before starting a career in journalism as Softpedia’s security news reporter. Eduard holds a bachelor’s degree in industrial informatics and a master’s degree in computer techniques applied in electrical engineering.

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