U.S. prosecutors says hackers obtained corporate press releases before they were made public, leading to more than $30 million in illegal trading profits. Rough Cut (no reporter narration).
ROUGH CUT (NO REPORTER NARRATION) U.S. prosecutors have charged nine people over their alleged roles in a hacking scheme to obtain corporate press releases before they were made public, which prosecutors said generated more than $30 million of illegal trading profits. Prosecutors in Brooklyn, New York made public an insider trading indictment charging four traders: Vitaly Korchevsky, a former hedge fund manager from Glen Mills, Pennsylvania; Vladislav Khalupsky, of Brooklyn and Odessa, Ukraine and Leonid Momotok, of and Alexander Garkusha of Georgia. A separate indictment made public in New Jersey charges Ivan Turchynov and Oleksandr Leremenko, two alleged computer hackers who live in Ukraine; Pavel Dubovoy, a trader from Ukraine; and Arkadiy Dubovoy and his son Igor Dubovoy, traders from Georgia. Authorities said that starting around February 2010, hackers infiltrated the networks of press release distributors Business Wire, MarketWired and PR Newswire, and gained access to corporate news such as financial results before it became public. According to the indictments, the news was then passed to traders who made illegal trades in stocks and options based on the stolen information, with foreign shell companies being used to share the rewards. Authorities said the scheme resulted in illegal profits on such companies as Acme Packet Inc, Align Technology Inc , Caterpillar Inc, Dealertrack Technologies Inc , Dendreon Corp, Edwards Lifesciences Corp, Panera Bread Co and Verisign Inc. Charges brought against the various defendants include securities fraud, and conspiracies to commit securities fraud, wire fraud and money laundering. A press conference to discuss the charges is scheduled for 11:30 a.m. EDT (1530 GMT) in Newark, New Jersey. A spokeswoman for the FBI said five of the defendants have been arrested. The U.S. Securities and Exchange Commission brought a related civil lawsuit charging many more defendants, and alleging that the thefts resulted in more than $100 million of illegal profit. It is seeking civil penalties and asset freezes, as well as the recoupment of illegal profits. The criminal case marks the first U.S. prosecution alleging a securities fraud scheme using hacked inside information. It is also the largest known suspected case of hacking that resulted in insider trading. None of the press release distributors or companies whose securities were traded were criminally charged. Business Wire is a unit of Warren Buffett's Berkshire Hathaway Inc. Until now, the SEC had brought only a handful of civil cases against individual hackers. In 2007, the agency filed a civil case against a Ukrainian trader named Oleksandr Dorozhko, accusing him of hacking into IMS Health Holdings Inc and stealing information on earnings that he used to make profitable options trades. In 2010, a federal court ordered Dorozhko to pay $580,000.