Federal prosecutors unsealed an indictment in New York against four men they say took part in a scheme to break into the computer systems of companies that put out corporate press releases and trade on the information before it was made public.
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Five of the suspects were arrested at their homes in Georgia and are scheduled to appear before a federal judge on Tuesday.
In 2007, the agency filed a civil case against a Ukrainian trader named Oleksandr Dorozhko, accusing him of hacking into IMS Health Holdings Inc. and stealing information on earnings that he used to make profitable options trades.
The hackers, who are thought to be in Ukraine and possibly Russian Federation, infiltrated the computer servers of PRNewswire Association, Marketwired and Business Wire, a unit of Warren Buffett’s Berkshire Hathaway, according to a person familiar with the matter.
Federal authorities made arrests this morning in a case involving an alleged insider trading ring that hacked several thousand press releases containing market-moving information.
The Department of Justice charged nine people in a criminal conspiracy with pocketing more than $30 million in illegal trades on the pilfered information.
This is the first important case that has uncovered the susceptibilities of financial markets in the digital age of insider trading that has crossed into the cyber kingdom.
Besides the two hackers, the DOJ indictment cites seven defendants and co-conspirators from Ukraine and the US states of Georgia, Pennsylvania and New York.
According to people having knowledge of the investigation said that for more than two years, investigators tried to solve the scheme and the trades, which further extended for another five years and continued until recently.
It all started when a sequence of suspicious trading by some of the defendants was brought to the notice of Prosecutors in Brooklyn and the FBI by the Securities and Exchange Commission. Federal agents alerted the three wire services of the computer breaches, and the firms did not disclose them publicly to allow the investigation to continue unimpeded, the person said. It wasn’t immediately clear if the men had attorneys to comment on the charges. The SEC is pursuing a parallel civil case against some of the individuals.
The victim newswires – PRNewswire, Marketwired, and Business Wire – are in the business of disseminating information on behalf of companies such as Bank of America, Boeing, Caterpillar, Hewlett Packard, Netflix, Panera Bread and Texas Instruments. Before commencing on his own hedge fund, he ran a mutual fund and worked on Wall Street. They list themselves in myriad real estate and construction businesses. No longstanding Wall Street connections are needed to glean advance information from companies.
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The case is noteworthy because of the combination of hacking and insider trading.
