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, according to a person familiar with the matter.
Officials have identified nine participants who operated the scheme and are expected to be charged Tuesday by officials in Brooklyn, New York and New Jersey.
The hackers, who are thought to be in Ukraine and possibly Russia, infiltrated the computer servers of PRNewswire Association LLC, Marketwired and Business Wire, a unit of Warren Buffett’s Berkshire Hathaway Inc., according to a person familiar with the matter.
The hackers passed the information to their associates in the U.S., 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 their retail brokerage accounts.The scheme netted more than $30 million, said the person.
Ukraine’s Hackers: What Do We Know?
- An international police operation into the “Shylock” banking malware, which infected more than 100,000 computers, led to properties in Ukraine being searched and computers seized in 2014.
- In June, Ukrainian police arrested five people suspected of links to ZeuS and Spyeye, two viruses that target online bank accounts around the world.
- The country’s Department on Combating Cybercrime, part of the Ministry of Internal Affairs, deals with online offenders.
Kit Chellel, Bloomberg News
It is the first major case of insider trading to cross into the cyber realm, exposing thevulnerabilities of financial markets in the digital age. Just as prosecutors deploy ever-more aggressive tactics like wiretaps to curb illegal trading, criminals have now leapt past them with a simple ruse: Steal information instead of persuading others to share it improperly. It’s also a great equalizer. No longstanding Wall Street connections are needed to glean advance information from companies.
Burgeoning Caseload
Still, the breakthrough is a significant victory for the Federal Bureau of Investigation and prosecutors, who have been struggling to halt a burgeoning caseload of computerincursions that have publicly shaken Target Corp., Sony Corp. and JPMorgan Chase & Co., among other big companies.
The investigation began when prosecutors in Brooklyn, New York, and the FBI received a referral from the Securities and Exchange Commission about a pattern of suspicious trading by some of the defendants. The U.S. Secret Service and federal prosecutors in New Jersey later began a separate investigation, the person said, that focused on the foreign hackers.
For more than two years, investigators unraveled the scheme and the trades, which spanned a period of five years and continued until recently, say people familiar with the investigation.
The newswires could not be immediately reached.
Federal charges including conspiracy to commit securities fraud and hacking are expected to be filed against the nine men in Brooklyn and New Jersey, the person said. The SEC is pursuing a parallel civil case against some of the individuals.
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