The Securities and Exchange Commission (SEC) is charging 32 people involved in the hacking of newswire services to gain confidential information to trade on. Over $100 million in illegal profits was gained from this criminal venture. The assets of the defendants have been frozen.

The SEC charges that over a five-year period, Ivan Turchynov and Oleksandr Ieremenko spearheaded the scheme, using advanced techniques to hack into two or more newswire services and steal hundreds of corporate earnings announcements before the newswires released them publicly.

Furthermore, the SEC charges that Turchynov and Ieremenko 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). Allegedly, these traders used this nonpublic information in a short window of time to place illicit trades in stocks, options, and other securities, sometimes purportedly funneling a portion of their illegal profits to the hackers.

In terms of the windows of opportunity, in one particularly dramatic instance that occurred on May 1, 2013, the hackers and traders allegedly moved in the 36-minute period between a newswire’s receipt and release of an announcement that a company was revising its earnings and revenue projections downward. According to the SEC’s complaint, 10 minutes after the company sent the still-confidential release to the newswire, traders began shorting its stock and selling futures, realizing $511,000 in profits when the company’s stock price fell following the announcement.

Andrew Ceresney, Director of the SEC’s Division of Enforcement, stated:

This cyber hacking scheme is one of the most intricate and sophisticated trading rings that we have ever seen, spanning the globe and involving dozens of individuals and entities. Our use of innovative analytical tools to find suspicious trading patterns and expose misconduct demonstrates that no trading scheme is beyond our ability to unwind.

The SEC’s complaint charges each of the 32 defendants with violating federal antifraud laws and related SEC antifraud rules. The complaint seeks 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.

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