TRENTON, N.J. (CN) - A rapidly expanding securities probe has netted more companies accused of scheming to steal not-yet-issued company press releases for use in insider trading, the Securities and Exchange Commission announced.
The SEC on Thursday sued nine companies for alleged violations of Federal Securities Laws as part of an ongoing computer hacking probe related to corporate press releases.
The probe has so far led to legal action against dozens of other companies, Russian traders, and Ukrainian computer hackers.
The purported scheme involves more than 100,000 press releases from publicly traded companies, which hackers stole from Marketwired, PR Newswire, and Business Wire hours, and in some cases, mere minutes before they were officially released by the news wire services.
The hackers then allegedly used that information to make trades before crucial information became public, making more than $20 million in illicit gains by trading in securities of such companies as the Las Vegas Sands and information tech company Solar Winds.
Among the named defendants in the latest lawsuit are companies based in Belize, Panama, the island country of Seychelles, and Dominica. Nearly all the individuals named in the SEC's lawsuit are Russian citizens.
All told, authorities believe the hacking ring netted traders more than $100 million in ill-gotten profits. The hackers, who targeted press releases concerning earnings reports and other material corporate information, were paid flat fees and sometimes percentage commissions based on the ill-gotten trading profits for their services.
Brokers allegedly made put or call options based on whether the news in the press releases was good or bad for the target company. The defendants also engaged in short selling, in which a trader sells securities it doesn't own in the hope that the securities drop in price and the securities can later be purchased at a lower price.
The hackers, who were allegedly led by Ivan Turchynov and Oleksandr Ieremenko, didn't focus on one newswire service, but oscillated between the three services depending on which they were able to hack. After November 2013, changes to the Marketwired system blocked the hackers' attempts; PR Newswire was able to block the hackers after changing its computer system in March 2013.
The lawsuit states that hackers brazenly advertised their services in video files showing the stolen files. The hackers allegedly used various IP addresses and aliases to hide their true identities, posed as others to break into the newswire computer systems, and then deleted the evidence of their intrusions.
The SEC has called the hacking scheme one of the most intricate and sophisticated it has run across. In August, SEC Chair Mary Jo White called the scheme "unprecedented in terms of the scope of the hacking, the number of the traders, the number of securities traded, and profits generated."
Last August the SEC charged 34 defendants, including several traders and 15 companies, in the scheme. Two of the Ukrainian defendants, Jaspen Capital Partners and its CEO Andriy Supranonok, pleaded guilty to stealing more than 150,000 press releases. They agreed to pay $30 million in fines and
In January, the SEC moved again, freezing the assets of five additional defendants, including Russian brokerage Ocean Prime and the Cayman Islands hedge fund Copperstone Capital. Other hedge funds based in Malta and Cyprus have also been charged in the scheme.
The newswire system companies have since beefed up their security and computer systems, but in August some employees at Marketwired were still reportedly receiving phishing emails with links to malware.
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