A Ukrainian energy engineering consultant was ordered on Monday to pay more than US$580,000 for improperly gaining access to information that allowed him to profit from a company's lower-than-expected earnings announcement.
Oleksandr Dorozhko of Uzhgorod, Ukraine, used means such as "hacking into computer networks or otherwise obtaining electronic access to systems" to gain information about IMS Health, according to the U.S. Securities and Exchange Commission (SEC), which filed suit against him in U.S. District Court for the Southern District of New York. Judge Naomi Reice Buchwald last week granted the SEC's request for a summary judgment against Dorozhko.
IMS Health does market research in the pharmaceutical and health care industries. Dorozhko bought more than $40,000 of put options just before IMS announced its third quarter 2007 earnings. A put option allows the buyer profit from the difference between an agreed sell price and a lower market price.
After the earnings announcement, IMS's stock subsequently fell 28 percent on Oct. 18, 2007, the steepest decline in the company's trading history, the SEC said. On that day "defendant Dorozhko sold all of his put options, realizing proceeds of over $328,000 and profits of over $280,000," the complaint said.
Dorozhko never had the money in hand. The complaint said the proceeds of his trades have been held by an Interactive Brokers account at Citibank, a New York financial institution within the court's jurisdiction.
The court ordered him to forfeit $286,456.59 in profits and $6,930.94 in prejudgement interest paid to his online brokerage account. He also must pay a fine of $286,456.59.