U.S. authorities on Tuesday brought charges against nine people
who were allegedly part of a group of traders who schemed to get
early access to corporate news releases and trade on the
developments before they were made public.
Those charged by the U.S. attorney's office in New Jersey
include Ivan Turchynov and Oleksandr Ieremenko, computer hackers
who resided in Ukraine; Arkadiy Dubovoy, a securities trader living
in Alpharetta, Ga., and his son Igor Dubovoy.; and Pavel Dubovoy,
who resided in Ukraine but was related to Messrs. Dubovoy. Four
unnamed co-conspirators were also identified in the indictment.
The charges range from wire fraud to securities fraud to
aggravated identity theft. Authorities believe the scheme netted
more than $30 million in illicit profits, according to court
documents.
Charges are also expected to be filed in Brooklyn, and the
Securities and Exchange Commission is seen unveiling related civil
charges as early as Tuesday.
The case may be the largest of its kind, people familiar with
the matter told The Wall Street Journal before the documents were
unsealed and illustrates the increasingly bridged lines between
cybertheft and traditional financial crimes.
The charges stem from a complicated cross-agency investigation
that involves at least six federal agencies. Top officials from
those agencies, including Jeh Johnson, U.S. secretary of homeland
security, and SEC Chairman Mary Jo White, are expected to travel to
New Jersey to announce the charges, people familiar with the matter
said. A news conference is set for 11:30 a.m. EDT.
Starting in February 2010, the hackers allegedly infiltrated the
systems of newswire services, such as Business Wire, that publish
news releases and obtained information from statements about
unannounced news, according to the New Jersey indictment. The
traders would then use the information to make early trades on the
deals, exploiting the small window of time between news releases
being uploaded into the system and the public announcement of the
deals.
Among the companies whose shares were affected were Caterpillar
Inc., Acme Packet Inc., Edwards Lifesciences Inc. and VeriSign
Inc.
In one example from October 2011, the hackers bought more than
$5.9 million worth of shares and options based on information from
Caterpillar Inc.'s unreleased third-quarter earnings news
release.
The charges lay bare an increasingly complex and dangerous black
market online. U.S. officials have increasingly warned that
criminals are meeting in dark corners of the web to collaborate or
barter different criminal skill sets—like hacking or securities
fraud—to pull off lucrative schemes.
Write to Chelsey Dulaney at Chelsey.Dulaney@wsj.com
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