US identifies insider trading ring with Ukraine hackers
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.