Federal regulators on Monday announced charges against an insider trading scheme of “unprecedented” size, involving hackers profiting over more than $100 million by gaining early access to corporate news releases before they were officially released.
The Securities and Exchange Commission charged 32 people from around the world with involvement in the scheme, including two Ukraine-based hackers.
“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,” SEC chair Mary Jo White said in a statement. “These hackers and traders are charged with reaping more than $100 million in illicit profits by stealing nonpublic information and trading based on that information. That deception ends today as we have exposed their fraudulent scheme and frozen their assets.”
The two Ukrainians hacked into wire services to gain early access to companies’ financial statements for five years, according to the SEC. The hackers then developed a profit-sharing scheme with traders to buy or sell based on that information.
SEC Division of Enforcement director Andrew Ceresney called it “one of the most intricate and sophisticated trading rings that we have ever seen, spanning the globe and involving dozens of individuals and entities.”
Ceresney claimed that the regulators’ “use of innovative analytical tools to find suspicious trading patterns and expose misconduct demonstrates that no trading scheme is beyond our ability to unwind.”
In one instance in 2013, according to the agency, the hackers accessed a company’s unfavorable earnings restatement after it was sent to a newswire but 36 minutes before it was released. Within 10 minutes, their group bet against the stock, profiting more than $500,000 in the short time span before the information was public.
The SEC is charging the hackers and traders with violating anti-fraud laws, and is pushing them to return their profits with interest and penalties.
The case is being prosecuted with the U.S. Attorney’s Offices for the District of New Jersey and the Eastern District of New York, the Federal Bureau of Investigation, and the Department of Homeland Security and the U.S. Secret Service. The federal agents also worked with the United Kingdom Financial Conduct Authority and the Danish Financial Supervisory Authority.
