The Securities and Exchange Commission says two of the 32 parties charged with profiting from information hacked from newswire services have agreed to pay $30 million to settle the changes.
Ukrainian-based Jaspen Capital Partners Limited and its CEO, Andriy Supranonok, were among those accused of generating $100 million in profits over five years using information from 150,000 yet-to-be-published press releases from Marketwired, PR Newswire and Business Wire.
Jaspen Capital Partners and Supranonok are alleged to have made $25 million in the scheme. As part of the settlement, the two defendants neither admitted or denied the SEC’s charges.
The SEC alleges that two hackers accessed the documents and sent them to 32 traders around the world.
Companies will often send information to the services and set it to be released at a particular time. Until that time, it’s still confidential.
The three newswire services in question are used to transmit a large amount of corporate and financial news, some of it market-moving, so getting access in advance could result in big gains for traders.
In one instance, hackers managed to grab a news release announcing a company was lowering its earning and profit forecasts about 36 minutes before it was due to go public.
Ten minutes later, traders who were involved in the scheme began shorting the company’s stock, essentially betting that it would fall. With the advance information on what was about to be announced, it’s as close to a sure-thing as exists in the stock market.
The result was a $511,000 profit after the stock fell following public release of the information.
The SEC has called this the largest-ever known case of hacking and securities fraud.