A month ago, the Securities and Exchange Commission brought charges against a large network of traders who made a big pile of money by hacking into corporate press release websites and trading on the news before it was made public. Two traders, who made $25 million in the scheme, settled the charges against them and returned the profits.
Ukrainian-based Jaspen Capital Partners Limited and CEO Andriy Supranonok agreed to pay the SEC $30 million to settle the charges. That’s a 20% premium on the $25 million that the firm made on the trades. The firm’s assets and accounts were frozen when the charges were brought. I assume that shut down business that went through the United States.
The scheme was based on hacks into Marketwired of Toronto, PR Newswire in New York, and Business Wire of San Francisco. The hackers got an early look at the press releases and traded on the likely movement of the stock.
At times, the scheme has been labeled “insider trading”, but that seems to be a bad label to me. The defendants were using stolen data for their trading strategies. They did not get the information through working inside or for the companies involved. John Reed Stark was one of the first to use the “outside trading” label.
Sources:
- SEC Obtains $30 Million From Traders Who Profited on Hacked News Releases
- SEC Charges 32 Defendants in Scheme to Trade on Hacked News Releases
- ‘Outsider Trading’ Crackdown Announced by Bruce Carton in Compliance Week
- The SEC’S “Outsider Trading” Dragnet by John Reed Stark in Cybersecurity Docket
- Ukrainian Firm, CEO to Pay $30 Million to Settle SEC Charges by Chelsey Dulaney in the Wall Street Journal