PR disaster: How hackers and insider traders made US$100m by peeking at press releases

An international web of hackers and traders made US$100 million on Wall Street by stealing a look at corporate press releases before they went out and then trading on that information ahead of the pack, US federal authorities charged.

Authorities said Tuesday it was the biggest scheme of its kind ever prosecuted, and one that demonstrated another alarming vulnerability in the financial system in this age of increasingly sophisticated cybercrime.

In a 21st-century twist on insider trading, the hackers broke into the computers of some of the biggest business newswire services, which put out earnings announcements and other press releases for a multitude of corporations.

Nine people in the US and Ukraine were indicted on federal criminal charges, including securities fraud, computer fraud and conspiracy. And the Securities and Exchange Commission brought civil charges against the nine plus 23 other people and companies in the US and Europe.

The case “illustrates the risks posed for our global markets by today’s sophisticated hackers,” SEC chief Mary Jo White said. “Today’s international case is 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 profits generated.”

The nine indicted include two people described as Ukrainian computer hackers and six stock traders. Prosecutors said those defendants made US$30 million from their part of the scheme.