U.S. Charges Nine People in $30 Million Insider Trading Scheme The defendants allegedly breached corporate press release distributors to see business news before it was publicly available.

By Reuters

entrepreneur daily

This story originally appeared on Reuters

Reuters | Eduardo Munoz
U.S. Attorney for New Jersey Paul J. Fishman (2nd L) speaks during a news conference in Newark, New Jersey.

U.S. prosecutors have charged nine people over their alleged roles in a hacking scheme to obtain corporate press releases before they were made public, which they said generated more than $30 million of illegal trading profit.

Prosecutors in Brooklyn, New York made public an insider trading indictment charging four traders: Vitaly Korchevsky, a former hedge fund manager from Glen Mills, Pennsylvania; Vladislav Khalupsky, of Brooklyn and Odessa, Ukraine and Leonid Momotok, of and Alexander Garkusha of Georgia.

An separate indictment made public in New Jersey charges Ivan Turchynov and Oleksandr Ieremenko, two alleged computer hackers who live in Ukraine; Pavel Dubovoy, a trader from Ukraine; and Arkadiy Dubovoy and his son Igor Dubovoy, traders from Georgia.

Authorities said that starting around February 2010, hackers infiltrated the networks of press release distributors Business Wire, MarketWired and PR Newswire, and gained access to corporate news such as financial results before it became public.

According to the indictments, the news was then passed to traders who made illegal trades in stocks and options based on the stolen information, with foreign shell companies being used to share the rewards.

Authorities said the scheme resulted in illegal profits on such companies as Acme Packet Inc, Align Technology Inc (ALGN.O), Caterpillar Inc (CAT.N), Dealertrack Technologies Inc (TRAK.O), Dendreon Corp, Edwards Lifesciences Corp (EW.N), Panera Bread Co (PNRA.O) and Verisign Inc (VRSN.O).

Charges brought against the various defendants include securities fraud, and conspiracies to commit securities fraud, wire fraud and money laundering.

A press conference to discuss the charges is scheduled for 11:30 a.m. EDT in Newark, New Jersey. A spokeswoman for the FBI said five of the defendants have been arrested.

The U.S. Securities and Exchange Commission brought a related civil lawsuit charging many more defendants, and alleging that the thefts resulted in more than $100 million of illegal profit. It is seeking civil penalties and asset freezes, as well as the recoupment of illegal profits.

The criminal case marks the first U.S. prosecution alleging a securities fraud scheme using hacked inside information.

It is also the largest known suspected case of hacking that resulted in insider trading.

None of the press release distributors or companies whose securities were traded were criminally charged. Business Wire is a unit of Warren Buffett's Berkshire Hathaway Inc(BRKa.N).

Until now, the SEC had brought only a handful of civil cases against individual hackers.

In 2007, the agency filed a civil case against a Ukrainian trader named Oleksandr Dorozhko, accusing him of hacking into IMS Health Holdings Inc (IMS.N) and stealing information on earnings that he used to make profitable options trades. In 2010, a federal court ordered Dorozhko to pay $580,000.

(Writing by Mica Rosenberg and Supriya Kurane; Editing by Edmund Klamann and Alden Bentley)

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

Editor's Pick

Related Topics

Business Ideas

55 Small Business Ideas to Start in 2024

We put together a list of the best, most profitable small business ideas for entrepreneurs to pursue in 2024.

Business News

Here Are 3 Strategies Startup Founders Can Use to Approach High-Impact Disputes

The $7 billion "buy now, pay later" startup Klarna recently faced a public board spat. Here are three strategies to approach conflict within a business.

Science & Technology

These Are the Top 6 AI Threats to Your Business Right Now

The modern workforce is forever changed by artificial intelligence. If you fail to understand that we will all need to learn AI to some degree, you haven't been paying attention.

Diversity

As a Black Woman CEO, I Built a Remote Company Not Just to Save Money — But to Mirror My Commitment to Diversity. Here's How.

To fuel innovation and global success, you absolutely need diverse perspectives — and having team members all across the world with varying thought processes, life experiences and viewpoints is the key.

Business News

'This Can't Be True': Google Responds to Viral Hoax Claiming the Company Is Shutting Down Gmail

The fake news release started making its way around X on Thursday.

Business News

I Tested the 'Invest As You Shop' App to See If It Really Makes Investing Less Intimidating

Grifin is an app that tailors a user's investments to their spending habits. Now, the app is getting even more personal.