Federal authorities have charged nine international traders and computer hackers in a 5-year scheme for providing confidential corporate news overseas, which generated over $30 million in illegal profits. The case is being brought up by authorities in Brooklyn and New Jersey, with the filing of parallel lawsuits.
The hackers charged in the indictment in Newark, N.J. include residents of Ukraine, Ivan Turchynov, 27, and Oleksandr Ieremenko, 24. Traders include Arkadiy Dubovoy, 51, and his son, Igor Dubovoy, 28, both of Alpharetta, Ga., and Pavel Dubovoy, 32, a second relative of Ukraine. The indictment in Brooklyn, N.Y. charged four traders: Vitaly Korchevsky, 50, a former hedge fund manager from Glen Mills, Pa; Vladislav Khalupsky, 45, of Brooklyn and Odessa, Ukraine, and Leonid Momotok, 47, and Alexander Garkusha, 47, of Georgia.
The indictments filed on Tuesday August 11, 2015 allege that the group stole more than 150,000 confidential press releases about pending information not yet released to the public from firms like Caterpillar (CAT), Marketwired, Netflix, Viacom, Business Wire, Bank of America, PR Newswire, Honeywell, Edwards Lifesciences (EW), Verisign (VRSN) and others. The scheme connected Wall Street trading and high-speed computers as the types of press releases that were hacked contained information such as companies’ earnings results and merger plans.
“In order to execute their trades before the stolen releases were made public, the trader defendants and other co-conspirators sometimes executed trades in very short windows of time between when the hacker defendants illegally accessed and shared the stolen releases and when the press releases were disseminated to the public by the victim newswires, usually shortly after the close of the markets,” the indictment alleged.
The trader defendants paid hackers for access to the news wires firms’ computer servers based on how much money the group made in profits by trading on the stolen press releases. The group would allegedly prey on a traditional system where publicly traded U.S. firms provided confidential corporate news.
In most cases, the men communicated about their work via email and chat groups. One bold statement from one of the defendants in 2012 said in a chat message online, “I’m hacking prnewswire.com.”
The hacking case also included a “phishing” technique, where employees of Marketwired were sent emails containing malware. The company ensured that the phishing attempt was identified and prevented any intrusion.
This criminal case marks the first U.S. prosecution alleging a securities fraud scheme using hacked inside information and the largest known resulting in insider trading.
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