High Tech and the Financial Markets
Keri Geiger writes: Exposing a new front in cybercrime, U.S. authorities broke up an alleged insider trading ring that relied on computer hackers to pilfer corporate press announcements and then profited by trading on the sensitive information before it became public.
The suspected hackers, who are thought to be in Ukraine, allegedly infiltrated the computer servers of PRNewswire Association LLC, Marketwired and Business Wire, a unit of Warren Buffett’s Berkshire Hathaway Inc., over a five-year period.
They siphoned more than 150,000 press releases including corporate data on earnings that could be used to anticipate stock market moves and make profitable trades, the U.S. said. The hackers passed the information to associates in America and Ukraine, who allegedly used it to buy and sell shares of dozens of companies, including Panera Bread Co., Boeing Co., Hewlett-Packard Co., Caterpillar Inc. and Oracle Corp., through retail brokerage accounts.
Prosecutors said the men targeted more than 100 companies and made “approximately 1,000 inside the window trades.” Money was then shifted offshore through Estonian banks, according to one of two federal indictments unsealed Tuesday.
The arrests and dual indictments in Brooklyn and New Jersey are a significant victory for the Federal Bureau of Investigation and prosecutors, who have been struggling to halt an increasing number of computer incursions that have publicly shaken Target Corp., Sony Corp. and JPMorgan Chase & Co., among other big companies.
With defendants spanning two countries, it’s not yet clear who masterminded the idea to hack the firms and trade off the information.
The only professional U.S. trader arrested was Vitaly Korchevsky, described by the authorities as the linchpin of the markets strategy, having run a mutual fund and worked on Wall Street before starting his own hedge fund.
The announcement, which sat in the wire’s server for less than 24 hours, was scooped up by the hackers and passed to the traders, according to the government. In this short window, they allegedly bought $8.3 million in Caterpillar stock and options. The announcement was then released publicly before the markets opened on Jan. 26..
They appear to have little or no financial credentials or obvious experience as traders. They work in real estate and construction and operate a myriad of LLCs that appear to be covers for their trading operations, according to public records.
Three of the defendants appear to be related: Igor, Arcadiy and Pavel Dubovoy. Arkadiy and Igor, who are father and son, currently live in Georgia, while Pavel is thought by the government to be in Ukraine.
