US iden­ti­fies in­sider trad­ing ring with Ukraine hack­ers

The Pak Banker - - INTERNATIONAL BUSINESS/SPORTS -

Ex­pos­ing a new front in cy­ber­crime, U.S. author­i­ties broke up an al­leged in­sider trad­ing ring that re­lied on com­puter hack­ers to pil­fer cor­po­rate press an­nounce­ments and then prof­ited by trad­ing on the sen­si­tive in­for­ma­tion be­fore it be­came public, ac­cord­ing to a per­son fa­mil­iar with the mat­ter.

Of­fi­cials have iden­ti­fied nine hack­ers and traders. Charges against some of the men were un­sealed Tues­day in New Jersey fed­eral court, and more are ex­pected later in Brook­lyn, New York. Five of the men were ar­rested by fed­eral agents in morn­ing raids in Ge­or­gia and Penn­syl­va­nia.

The hack­ers, who are thought to be in Ukraine and pos­si­bly Rus­sia, in­fil­trated the com­puter servers of PRNewswire As­so­ci­a­tion LLC, Mar­ketwired and Busi­ness Wire, a unit of War­ren Buf­fett's Berk­shire Hath­away Inc., ac­cord­ing to a per­son fa­mil­iar with the mat­ter.

Over sev­eral years, they al­legedly si­phoned 150,000 press re­leases in­clud­ing cor­po­rate data on deals and earn­ings that could be used to an­tic­i­pate stock mar­ket moves and make prof­itable trades. The hack­ers passed the in­for­ma­tion to their as­so­ci­ates in the U.S., who al­legedly used it to buy and sell shares of dozens of com­pa­nies, in­clud­ing Pan­era Bread Co., Boe­ing Co., Hewlett-Packard Co., Cater­pil­lar Inc. and Or­a­cle Corp., through their re­tail bro­ker­age ac­counts. Money was then shifted off­shore through Estonian banks. The scheme net­ted more than $30 mil­lion, said the per­son.

It is the first ma­jor case of in­sider trad­ing to cross into the cy­ber realm, ex­pos­ing the vul­ner­a­bil­i­ties of fi­nan­cial mar­kets in the dig­i­tal age. Just as pros­e­cu­tors de­ploy ever-more ag­gres­sive tac­tics like wire­taps to curb illegal trad­ing, crim- in­als have now leapt past them with a sim­ple ruse: Steal in­for­ma­tion in­stead of per­suad­ing oth­ers to share it im­prop­erly. It's also a great equal­izer. No long­stand­ing Wall Street con­nec­tions are needed to glean ad­vance in­for­ma­tion from com­pa­nies.

Still, the break­through is a sig­nif­i­cant vic­tory for the Fed­eral Bureau of In­ves­ti­ga­tion and pros­e­cu­tors, who have been strug­gling to halt a bur­geon­ing caseload of com­puter in­cur­sions that have pub­licly shaken Tar­get Corp., Sony Corp. and JPMor­gan Chase & Co., among other big com­pa­nies. Named in the 23-count New Jersey in­dict­ment on hack­ing-re­lated and se­cu­ri­ties fraud charges are Ivan Turchynov, Olek­sandr Iere­menko, Arkadiy Dubovoy, Igor Dubovoy and Pavel Dubovoy. Lit­tle is known about the men other than they worked with oth­ers to siphon in­side in­for­ma­tion out of sev­eral public re­la­tions firms.

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