Authorities have broken up a global fraud scheme that hacked into three major newswires since 2010 and reaped $100M in illicit profits by trading on the information in press releases before they were disseminated.
Business Wire, Marketwired and PR Newswire were infiltrated in the scheme as recently as May 2015, according to the federal complaints unsealed today.
The Securities Exchange Commission announced civil fraud charges against 32 people in the operation, while criminal charges against nine people were filed in two indictments unsealed by the US Attorneys for New York and New Jersey.
"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," said SEC Chair Mary Jo White. "That deception ends today as we have exposed their fraudulent scheme and frozen their assets."
Business Wire said it hired a prominent cybersecurity firm to conduct forensic testing of its systems. "Despite extreme vigilance and commitment, recent events illustrate that no one is immune to the highly sophisticated illegal cyber-intrusions that are plaguing every aspect of our society," said BW CEO Cathy Baron Tamraz, who noted the company conducts multiple security audits annually.
Marketwired has engaged Levick in Washington for PR counsel regarding the hack. "Protecting our customers’ information is one of our highest priorities," said a Marketwired spokesman. "We found and fixed the issue at the heart of this matter and we are confident that Marketwired is protected by world-class security, monitoring and prevention practices."
PR Newswire CEO Robert Gray said his company is also cooperating with investigators and commended the government for its "diligence and continued focus." He added: "At PR Newswire, we take security very seriously and are dedicated to protecting our information and systems."
All three companies said they cooperated with authorities in the investigations.
Ukrainians Lead Plot
Masterminds of the scheme were two Ukrainian nationals -- Ivan Turchynov, 27, and Oleksandr Ieremenko, 23 -- who allegedly worked with traders in the US, Ukraine and Russia. Turchynov and Ieremenko masked their identities online by posing as newswire employees and customers and recruited traders with a video touting their ability to gain information before its public release.
The scheme even reached the point where traders created "shopping lists" or "wish lists" for the hackers, listing desired press releases from Marketwired and PR Newswire, the Dept. of Justice said.
The SEC complaint says the perpetrators hacked into the newswire systems from 2010 to 2014, stealing more than 100,000 press releases before they were publicly issued.
The SEC complaint notes that many of the releases contained earnings results and forecasted earnings for companies like H-P, Home Depot, Panera Bread and Caterpillar.
“The defendants were a well-organized group that allegedly robbed the newswire companies and their clients and cheated the securities markets and the investing public by engaging in an unprecedented hacking and trading scheme,” U.S. Attorney for New Jersey Paul Fishman said.
Five traders in the US were arrested this morning, while international arrest warrants have been issued for the two Ukrainian principals and two other traders facing criminal charges.
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