SEC Charges 32 Defendants in Scheme to Trade on Hacked News Releases

The SEC charged 32 defendants with fraud for taking part in "a scheme to profit from stolen nonpublic information about corporate earnings announcements" that generated "more than $100 million in illegal profits." According to the SEC's complaint, two Ukrainian defendants hid the "intrusions" by using "proxy servers to mask their identities and by posing as newswire service employees and customers." The SEC further charged that the two Ukrainian defendants created "a secret web-based location" to transmit the stolen data to traders in Russia, Ukraine, Malta, Cyprus, France and three U.S. states: Georgia, New York and Pennsylvania. The traders are alleged to have used this nonpublic information in a short window of opportunity to place illicit trades in stocks, options and other securities, sometimes purportedly funneling a portion of their illegal profits to the hackers.

SEC Chair Mary Jo White stated that "This international scheme is unprecedented in terms of the scope of the hacking, the number of traders, the number of securities traded and profits generated."

The SEC's complaint charged each of the 32 defendants with violating federal antifraud laws and related SEC antifraud rules and sought a final judgment ordering the defendants to pay penalties, return their allegedly ill-gotten gains with prejudgment interest and be subject to permanent injunctions from future violations of the antifraud laws.