Trader pleads guilty in newswire hack scheme

Trader pleads guilty in newswire hack scheme
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A Georgia trader has pleaded guilty to making illegal trades based off of stolen, unpublished press releases obtained from hackers who broke into three business newswires.

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The scheme — which resulted in the theft of more than 150,000 press releases from publicly traded companies — netted approximately $30 million in illegal profits, the Justice Department said Tuesday.

Leonid Momotok, of Suwanee, Ga., traded on stolen press releases containing nonpublic information from companies such as Caterpillar, Hewlett-Packard, Home Depot and Panera Bread, according to the Justice Department.

“Momotok and his group of traders engaged in a brazen scheme that was unprecedented in its scope, impact and sophistication,” Robert Capers, United States attorney for the Eastern District of New York, said in a statement.

Nine other hackers and securities traders implicated in the case have been indicted on criminal charges.

The Securities and Exchange Commission (SEC) has charged 32 people in the scheme, including two Ukrainian men who are accused of hacking the newswire services before feeding the information to at least 30 other people inside and outside the U.S.

The two hackers who were the ringleaders of the scheme — Ivan Turchynov and Oleksandr Ieremenko — developed a “secret web-based location” to send the purloined information to traders in numerous countries, including Russia, France and the U.S., the SEC said.

The hackers provided Momotok and other traders with credentials and instructions on how to access and use overseas servers where the stolen press releases were store and shared.

Those traders would then swiftly arrange trades to capitalize on the brief window — sometimes as short as 36 minutes — before the information was published.

They would move stocks, options and other securities, according to the SEC, sometimes giving a kickback to the original hackers. A few traders even gave the Ukrainian duo direct access to their brokerage accounts.

Momotok faces up to 20 years in prison.