U.S. authorities announced Tuesday that they were indicting nine individuals over their alleged roles in an insider trading scheme that generated more than $100 million in illegal profits. Federal cases were filed in New Jersey and Brooklyn. A parallel lawsuit was filed by the SEC. The authorities allege that over a five year period, traders worked in conjunction with overseas hackers to break into the servers of PRNewswire, Marketwired and Business Wire as a way to gain access to press releases and earnings data before they became public. Doing this, the government alleges, the traders were able to make trades based on this information and profit accordingly.
The unsealed indictments (embedded below) also allege that the traders shared their profits with the hackers. The stocks of the companies targeted include Panera Bread, Hewlett-Packard, Oracle and Bank of America. SEC chairman Mary Jo White called the case “unprecedented in terms of the scope of the hacking at issue, the number of traders involved, the number of securities unlawfully traded and the amount of the profits generated.” Although insider trading cases aren’t new, the way traders worked with hackers to target press websites for information before it goes public, certainly is a novel approach to access.
In a press conference held by the various agencies, authorities said that hackers often used traditional phishing exploit as a way to gain access to press releases and earnings documents. Traders gave hackers a list of documents and companies to target. Once information was obtained — it could be just hours before the information became public — traders would make trades and profit accordingly.