NEW YORK (AFP) – An international team of computer hackers and stock traders was charged with pocketing more than $100 million in illicit profits based on stolen market-moving financial information, US officials announced Tuesday.
The Department of Justice charged nine people in a criminal conspiracy with pocketing more than $30 million in illegal trades on the pilfered information.
A parallel civil case from the US Securities and Exchange Commission listing 32 defendants said the scheme yielded over $100 million in unlawful profits.
“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,” said SEC Chair Mary Jo White.
The conspiracy was engineered by a pair of hackers in Ukraine who successfully penetrated the computer systems of Marketwired, PR Newswire and Business Wire, which distribute press releases for major publicly traded companies, the officials said.
The Ukraine-based hackers stole some 150,000 press releases from February 2010 through this year that contained non-public information critical to stock valuation, the DOJ said.
Other defendants then “executed profitable trades based on the material nonpublic information contained in the Stolen Releases,” the department said in announcing the criminal indictment.
Besides the two hackers, the DOJ indictment cites seven defendants and co-conspirators from Ukraine and the US states of Georgia, Pennsylvania and New York. Five of the defendants have been arrested, said a spokesman for the US attorney in New Jersey.
The SEC complaint, filed in a New Jersey federal court on Thursday and unsealed Friday, lists the same defendants, plus additional trading defendants, including in France and Russia.
“The hacker defendants stole the press releases and passed them to the trader defendants in the window of time between when the press releases were uploaded to the newswire service s system and when the press releases were publicly issued,” the SEC complaint said.
“As a result, the trader defendants had an unfair trading advantage over other market participants.”
Hackers took newswire employee login identities and introduced malware in the systems. Hacker defendants also created an instructional video for their cohorts on how to access the stolen information, the DOJ indictment said.
Defendants pocketed about $648,000 in October 2011 in gains in Caterpillar stock after buying shares of the industrial heavyweight based on a stolen press release that said quarterly net income rose 27 percent.
In October 2013, defendants made about $1 million after accessing early a Panera Bread press release that slashed its earnings forecast. Prior to the public release of the information, the defendants “shorted” or bet, that shares would fall.