Stolen press releases key to $30m scam
Exposing a new front in cybercrime, US authorities broke up an alleged insider trading ring that relied on computer hackers to steal corporate press announcements before they were released and then profited by trading on the sensitive information.
In morning raids in Georgia and Pennsylvania yesterday, federal agents arrested five men, while four others indicted on hacking and securities fraud charges remain at large.
The alleged hackers, who are thought to be in Ukraine and possibly Russia, allegedly infiltrated the computer servers of PRNewswire Association, Marketwired and Business Wire, a unit of Warren Buffett's Berkshire Hathaway, over a five-year period.
They siphoned more than 100,000 press releases including corporate data on earnings that could be used to anticipate stock market moves and make profitable trades.
The hackers passed the information to associates in the US, who allegedly used it to buy and sell shares of dozens of companies, including Panera Bread, Boeing, Hewlett-Packard, Caterpillar and Oracle, 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 yesterday.
While US prosecutors said the nine men netted $30m, a broader lawsuit by the Securities and Exchange Commission listed 12 men and 15 companies as defendants in a scheme that allegedly earned more than $100m.
The prosecution's case, led by the Brooklyn US Attorney's Office and the FBI, shows how insider trading has crossed into the cyber realm.
The criminals' ruse was to steal information instead of persuading others to share it, negating any need for Wall Street connections traditionally need to glean advance information from companies.