• US stock market daily report (August 11, 2015, Tuesday)

    During a news conference Tuesday morning, top U.S. law-enforcement officials unveiled charges from the U.S. attorney’s offices in Brooklyn and New Jersey that detailed an alleged insider trading scheme dating back to 2010. According to court documents, the insider trading activity netted roughly $30 million in illicit profits. The Securities and Exchange Commission (SEC) unveiled related civil charges against 32 defendants and put the size of the alleged profits at nearly $100 million.

    The alleged international plot unfolded in chat rooms in the dark side of the Internet, where U.S. traders teamed with hackers in Eastern Europe to conspire on a newfangled approach to insider trading. The case illustrates the increasingly bridged lines between cyber-theft and traditional financial crimes which are normally handled by the Federal Bureau of Investigation (FBI).

    According to the indictments, Hackers allegedly infiltrated the systems of various news-wire services that publish corporate news releases, including Business Wire, Marketwired and PRNewswire Association LLC.

    The hackers allegedly infiltrated the systems of newswire services that publish press releases and obtained information from statements about unannounced news, starting in February 2010. The group of cyber criminals exploited the small window of time between press releases being uploaded into the system and the public announcement of the deals, using the information to make insider trades on the deals. Charges against the group range from wire fraud, securities fraud and aggravated identity theft.

    The indictments said they snatched information from over 150,000 news releases. In some instances, the group would create “shopping lists” of companies expected to make announcements and pass it on to hackers. According to the indictments, the criminal traders paid the hackers for access to the newswires’ servers based in part on how much money the traders then made on early trading. The illegal profits were then allegedly laundered through offshore shell companies.

    Mary Jo White, chairwoman of the SEC, said the case was “unprecedented, in terms of the scope, the hackers at issue, the number of traders involved, the number of securities unlawfully traded and the amount of profits generated.”

    U.S. authorities indicted nine people who were allegedly part of a group of traders who schemed to get early access to corporate press releases and trade on the developments before the news releases were made public. According to the indictments, the traders made trades on at least 800 of the stolen news releases.

    At a press conference, U.S. Attorney Paul Fishman from New Jersey said that authorities seized 17 brokerage accounts believed to contain $6.5 million as well as 15 properties, a house boat, a shopping center and an apartment complex.

    The indictments charged Ivan Turchynov and Oleksandr Ieremenko, computer hackers who resided in Ukraine; Arkadiy Dubovoy, a securities trader living in Alpharetta, Ga. as well as his son Igor Dubovoy, and Pavel Dubovoy, who resided in Ukraine. Four unnamed co-conspirators were also identified in the indictment.

    Contributed by Millennium Traders
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