The Securities and Exchange Commission (SEC) recently announced fraud charges against 32 defendants for taking part in a scheme to profit from stolen nonpublic information about corporate earnings announcements. Those charged include two Ukrainian men who allegedly hacked into U.S. newswire services to obtain the information and 30 other defendants in and outside the U.S. who allegedly traded on it, generating more than $100 million in illegal profits.
The SEC’s complaint was unsealed in U.S. District Court in Newark, N.J., and the court 
entered an asset freeze and other preliminary relief that day. This international scheme is unprecedented in terms of the scope of the hacking, the number of traders, the number of securities traded and profits generated,” said SEC Chair Mary Jo White.
The SEC alleges that over a five-year period, Ivan Turchynov and Oleksandr Ieremenko spearheaded the scheme, using advanced techniques to hack into two or more newswire services and steal hundreds of corporate earnings announcements before the newswires released them publicly. The SEC further charges that the pair created a secret web-based location to transmit the stolen data to traders in Russia, Ukraine, Malta, Cyprus, France, and three U.S. states (Georgia, New York, and Pennsylvania).
The nonpublic information was use during a short window of opportunity to place illicit trades in stocks, options, and other securities, sometimes purportedly funneling a portion of their illegal profits to the hackers.
Law enforcement officials said the companies — Business Wire, PR Newswire and Marketwired — often detected the overseas hackers and kicked them out, but the hackers returned time and time again.
The NYTimes offers minute details of how the scheme operated with one company, Panera Bread, from information gleaned from court documents.
While crime may not pay–at least for those we know who get caught–what we don’t know is what we don’t know. Accordingly, remember our feature story a few days ago about cybersecurity and commercial lenders (“Is it Safe? Cybersecurity Threat to Lending is Real”)? Might be a good idea to read it again and give some proactive thinking about how to make sure your company–and clients–aren’t the next victim to some seemingly preventable theft of information that’s harmful to someone.
Did you know SBFI offers commercial lender training–learn more here.
Read more stories of interest to commercial lenders here.
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