A federal jury in the U.S. District Court for the Eastern District of New York convicted a former hedge fund manager and a former securities trader of various securities fraud charges for their roles in an international newswire hacking operation that allegedly generated over $30 million in illicit profits. The two individuals are now awaiting sentencing.
According to the DOJ, a former hedge fund manager and a securities trader (the "Defendants") made numerous trades based on information they received from pre-distribution press releases that were accessed illegally by international hackers. The stolen releases included nonpublic financial information on several public companies. The DOJ found that the Defendants took actions to conceal their illegal trading activity, including through various technological measures and by sending their ill-gotten gains to offshore shell companies. The DOJ said that the hedge fund manager made trades in his personal account and generated over $15 million in illegal profits, while the securities trader traded in accounts to benefit the hacking organization, receiving over $500,000 for his efforts.
Thus far, six individuals have pled guilty or been convicted of criminal charges for their roles in the hacking and trading scheme.
The SEC is pursuing civil charges against the Defendants and several others in a parallel action. Thirteen individuals agreed to settlements, with the SEC recovering over $53 million.
Commentary / Joseph V. Moreno
The nature of the data stolen and utilized in this scheme illustrates an evolution in both creativity and aggressiveness on the part of cybercriminals. Where hackers were once primarily focused on identity theft, bank account, and credit card information, the goal here was non-public information held by relatively soft targets — newswire organizations. Having stolen over 100,000 press releases during the course of the scheme, the perpetrators used a shadowy international network of traders and sophisticated trading methods to execute trades ahead of public distribution of the information. Of the many lessons learned from this case, the most critical is that everyone is a potential target for cyberattacks.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
