The Securities and Exchange Commission (SEC) and Justice Department announced concurrent complaints and indictments on Tuesday against defendants in an international scheme to hack into business newswires and steal nonpublic information used to make millions in illegal profits.
U.S. Securities Exchange Commission (SEC) Chair Mary Jo White announced the charges alongside federal criminal charges announced by U.S. Attorney Paul Fishman, District of New Jersey, and Acting U.S. Attorney Kelly Currie, Eastern District of New York. Other attendees of the announcement included Homeland Security Secretary Jeh Johnson; U.S. Secret Service Director Joseph Clancy; and FBI Assistant Director-in-Charge Diego Rodriquez, New York Field Office.
The SEC announced fraud charges against 32 defendants in the scheme, which involved two Ukrainian men who allegedly hacked into newswire services to steal hundreds of corporate earnings announcements from hundreds of publicly traded companies before they were publicly released, then connected the information to American and international traders who used the information to place illicit trades in stocks, options, and other securities.
The hacking allegedly occurred between February 2010 and August 2015.
“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. These hackers and traders are charged with reaping more than $100 million in illicit profits by stealing nonpublic information and trading based on that information,” Mary Jo White, Securities and Exchange Commission Chair, said in a statement.
Ivan Turchynov and Oleksandr Ieremenko allegedly led the scheme for five years by hacking Marketwired L.P., PR Newswire Association LLC (PRN), and Business Wire, stealing corporate earnings announcements before they were publicly released, and connecting the information to traders.
The SEC charges Turchynov and Ieremenko with creating a secret web-based location to transmit the stolen data to traders in Georgia, New York, and Pennsylvania. International traders involved in the scheme were based in Russia, Ukraine, Malta, Cyprus, and France. Sometimes a portion of the profits were funneled to the hackers, the SEC alleges.
“This cyber hacking scheme is one of the most intricate and sophisticated trading rings that we have ever seen, spanning the globe and involving dozens of individuals and entities,” Andrew Ceresney, Director of the SEC’s Division of Enforcement, said.
The commission exposed the misconduct by using analytical tools to find suspicious trading patterns, Ceresney said.
Concurrently, the U.S. Attorney’s Office for the District of New Jersey and the Office for the Eastern District of New York announced criminal charges against nine of the individuals involved in the scheme, involving $30 million of the illegal profits.
The indictments unsealed in Brooklyn, N.Y., and Newark, N.J., federal courts charge the defendants with hacking into the newswires and stealing confidential information about companies that traded on the NASDAQ and NYSE. This is the largest case of its kind ever prosecuted, the Justice Department said.
The defendants allegedly stole about 150,000 confidential press releases from the newswire servers and traded before over 800 releases became public.
According to the indictments, the traders created shopping or wish lists for the hackers to take. This included upcoming press releases from Marketwired and PRN for publicly traded companies. The traders generally traded ahead of the public distribution of the stolen releases and their activities allegedly shadowed the hackers’ capabilities to take stolen press releases. To act on the information, sometimes traders had to execute trades in very short windows of time, with often all the activities occurring on the same day, the Justice Department said.
“The defendants launched a series of sophisticated and relentless cyber attacks against three major newswire companies, stole highly confidential information and used to enrich themselves at the expense of public companies and their shareholders,” Fishman said at the announcement.
The officials said cooperation and investigative techniques resulted in the charges, with Johnson highlighting the work of the Secret Service investigative team.
“In matters of cybersecurity, the Department of Homeland Security has a major law enforcement role, and our work to counter cyber threats is a critical priority for the Secret Service because of the substantial threat it poses to this nation’s financial infrastructure,” Johnson said.
“Cyber cases such as this are a vital part of the Secret Service’s integrated mission. This is yet another example of the successful investigative work being done in coordination with our partners in the global law enforcement community,” Clancy said.
The New Jersey Indictment charges five defendants: Turchynov, Ieremenko, and Pavel Dubovoy, all of Ukraine; and Arkadiy Dubovoy and Igor Dubovoy, of Alpharetta, Ga., with wire fraud conspiracy, securities fraud conspiracy, wire fraud, securities fraud, and money laundering conspiracy. Turchynov and Ieremenko are also charged with computer fraud conspiracy, computer fraud, and aggravated identity theft.
The New York indictment charges four defendants: Vitaly Korchevsky, of Glen Mills, Pa; Vladislav Khalupsky of Brooklyn, N.Y.; and Odessa, Ukraine; Leonid Momotok, of Suwanee, Ga.; and Alexander Garkusha, of Cummings and Alpharetta, Ga., with wire fraud conspiracy, securities fraud conspiracy, securities fraud, and money laundering conspiracy.
Earlier on Tuesday, the government seized 17 bank and brokerage accounts containing over $6.5 million of alleged criminal proceeds, the Justice Department said. It also took steps to restrain 12 properties worth over $5.5 million.
Five of the nine defendants in the Justice Department case were arrested Tuesday: Arkadiy Dubovoy, Igor Dubovoy, Momotok, Garkusha, and Korchevsky. Turchynov, Ieremenko, Pavel Dubovoy, and Khalupsky remain in Ukraine with international arrest warrants issued for their arrests.