NEW YORK • Exposing a new front in cybercrime, the United States authorities broke up an alleged insider trading ring that relied on computer hackers to steal corporate press announcements. The suspects allegedly 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 yesterday in the New Jersey federal court, with the remaining charges laid out in Brooklyn, New York. Five of the men were arrested in morning raids in Georgia and Pennsylvania.
The suspected hackers, who are thought to be in Ukraine and possibly Russia, infiltrated the computer servers of PR Newswire Association, Marketwired and Business Wire, a unit of investor Warren Buffett's Berkshire Hathaway.
Over several years, they allegedly siphoned off 150,000 press releases with 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 US, who allegedly used it to buy and sell shares of dozens of companies, including Panera Bread, Boeing, Hewlett-Packard, Caterpillar and Oracle, through their retail brokerage accounts.
Money was then shifted offshore through Estonian banks.
The scheme netted more than US$30 million (S$41.5 million), said the source.
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, criminals have now leapt past them with a simple ruse: Steal information instead of persuading others to share it improperly.
No long-standing Wall Street connections are needed to glean advance information.
Still, the arrests are 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, Sony and JPMorgan Chase, among other big companies.
Named in the 23-count New Jersey indictment on hacking- related and securities fraud charges were Ivan Turchynov, Oleksandr Ieremenko, Arkadiy Dubovoy, Igor Dubovoy and Pavel Dubovoy.
Other than Vitaly Korchevsky, the alleged professional conduit of the group, the names of the remaining members of the gang had not been released.
Little is known about the men, other than that they allegedly worked with others to siphon off inside information from several public relations firms. With defendants spanning two, possibly three, countries, it is not yet clear who masterminded the idea to hack the firms and trade off the information.
Other than Korchevsky, the men worked in real estate and construction and operated several private firms that appear to have been covers for their trading operations, according to public records.
The scarce credentials show that in the new world of insider trading, anyone willing to pay for hackers' services may be able to obtain information for illicit trading.