What Happens When Hackers Meet Rogue Traders?

During my time at the Clearinghouse I learned how valuable press releases are, not only to traders, but to shareholders awaiting news on case filings and their settlements. Today, the Securities and Exchange Commission, federal prosecutors, and other law enforcement agencies announced the filing of indictments and the arrest of several hackers and rogue traders who allegedly engaged in insider trading.

The scheme took place over five years and consisted of the traders sending hackers (headquartered in the Ukraine) a list of companies that prepared press releases before they were disseminated to the public.  The hackers would then provide the traders tutorials on how to compromise the companies’ networks and obtain a pre-release view of the corporate statements to the public. Consequently, 32 traders and hackers were able swindle over $100 million dollars in ill-gotten gains on the trading of inside information.

One of the indictments details that five of the named defendants broke into press release companies like Marketwired, Business Wire, and PR Newswire to steal over 150,000 news releases being prepared for disclosure on behalf of the publicly traded companies. Traders would typically agree to pay the hackers a percentage or a flat fee for gaining this advantage over the market on the unreleased information.  Some of the companies the traders obtained inside information on were Clorox, Caterpillar, Honeywell, and Bank of America.

Like most sophisticated fraudsters, the defendants started careful and meticulous, but they were caught once they became too sloppy and overly brazen. In many of the illicit trades the rogues would only act on a small portion of the hundreds of thousands of press releases in order to conceal their plot. After the illegal profits came in, a laptop was seized and the hackers routinely bragged in chat rooms with messages like, “I’m hacking prnewswire.com.”

This story demonstrates not only shows how scary things can be when dirty traders and hackers team up, but how hackers to are finding new ways to exploit systems for big payoffs.  Despite the ingenuity of these hackers, it all came to an end when rudimentary mistakes were made once the money came rolling in.