WASHINGTON – A Ukrainian firm and its CEO are paying $30 million to settle U.S. regulators’ charges they were part of an international web of hackers and traders that made $100 million by getting advance peeks at sensitive corporate news releases.
The Securities and Exchange Commission announced the settlement Monday with Jaspen Capital Partners and CEO Andriy Supranonok, who agreed to make restitution for their allegedly ill-gotten gains. They neither acknowledged nor denied wrongdoing but did agree to refrain from future violations of the securities laws.
The SEC last month brought civil charges against Jaspen, Supranonok and 32 other people and companies in the U.S. and Europe, accusing them of raking in $100 million over five years by stealing looks at corporate press releases before they were made public and then trading on that information ahead of the pack.
U.S. authorities said it was the biggest scheme of its kind ever prosecuted, and one that pointed to an alarming vulnerability in the financial system in the age of increasingly sophisticated cybercrime. In a 21st-century twist on insider trading, the hackers allegedly broke into the computers of some of the largest business newswire services, which put out earnings announcements and other press releases for a host of corporations.
Separately, nine of the other people, in the U.S. and Ukraine, were indicted on criminal charges — including securities fraud, computer fraud and conspiracy — by federal prosecutors in New Jersey and Brooklyn, New York. The schemers are said to have used the information from more than 800 announcements stolen from the newswires’ computer servers to trade in advance of their public release.
Supranonok, who lives in Kyiv, Ukraine, heads Jaspen and owns 30 per cent of its shares, according to the SEC. The agency said Supranonok and the firm made about $25 million from speculative trades based on press releases between 2010 and 2014, and additional profits this year.
The services are Marketwired of Toronto, PR Newswire in New York and Business Wire of San Francisco.
A strong earnings report or other positive news can cause a company’s stock to rise, while disappointing news can make it fall. The conspirators typically were said to have used the advance information to buy stock options, which are essentially a bet on whether a stock will move up or down.
In 2013, for example, the hackers got an early peek at a press release from Panera Bread Co. announcing that it was lowering its earnings projections. The hacking ring bet correctly the stock would fall when the news came out, and turned a profit of about $1 million the next day, according to the government.
The hackers were routinely paid a cut of the profits, the government alleged.