An alliance of mainly U.S.-based stock traders and computer hackers in Ukraine made as much as $100 million in illegal profits over five years after stealing confidential corporate press releases, U.S. authorities said on Tuesday.
The case marks the first time that U.S. prosecutors have brought criminal charges for a securities fraud scheme that involved hacked inside information, in this instance 150,000 press releases from distributors Business Wire, Marketwired and PR Newswire.
"This is the story of a traditional securities fraud scheme with a twist - one that employed a contemporary approach to a conventional crime," FBI Assistant Director-in-Charge Diego Rodriguez said at a news conference.
Prosecutors said that hackers based in Ukraine infiltrated press releases before they were due to be released by the distributors. The traders gave the hackers "shopping lists" of releases, prosecutors said.
The hackers created a "video tutorial" to help traders see the stolen releases, and were paid a portion of the profits from trades based on the information in them, prosecutors said.
Nine people were indicted by grand juries in Brooklyn, New York, and in Newark, New Jersey, on charges that they made $30 million in illegal profits starting around February 2010.
Five of the nine charged were arrested on Tuesday, prosecutors said. They said international arrest warrants were issued for the other four.
A parallel U.S. Securities and Exchange Commission (SEC) civil lawsuit charged 17 people and 15 corporate entities and said that thefts of inside information resulted in more than $100 million in illegal profits.
The SEC said the network included traders in New York, Cyprus, France, Malta and Russia. The regulator said it seeks civil penalties and has already obtained a court-ordered freeze of assets.
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