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How hackers made millions off unpublished press releases

A newly uncovered fraudulent scheme has had hackers making millions off unpublished press releases.

The US Securities and Exchange Commission (SEC) has reported that a group of accused, including six American stock traders and two Ukrainian hackers, along with 23 other defendants have been running an international fraudulent scheme.

This was done by hacking the computer servers of at least two newswire services and stealing, confidential earnings information for numerous publicly-traded companies from press releases that had not yet been released to the public, said the SEC report.

Two Ukrainian ringleaders of the scheme “hired” stock traders from the US, Russia, Ukraine, and other European countries. These two also posed as employees at the press release services.

According to an AP article, the hackers gained access to more than 150,000 press releases that were about to be issued by Marketwired of Toronto; PR Newswire in New York; and Business Wire of San Francisco. The press releases contained earnings figures and other corporate information.

One example was when the hacker group made more than US$600,000 by trading the stock of Caterpillar Inc. in 2011 after getting an preview of a news release that said the heavy-equipment maker’s profits were up 27%, said AP.

The SEC says that these hackers have then used the stolen material nonpublic information to trade securities and reap over US$100 million in unlawful profits, over a five year period.

Five have been arrested in the US on Tuesday, and warrants were issued for four others in Ukraine.

“The hacker defendants stole the press releases and passed them to the trader defendants in the window of time between when the press releases were uploaded to the newswire service’s system and when the press releases were publicly issued. As a result, the trader defendants had an unfair trading advantage over other market participants because they knew the content of the press releases before that information was publicly announced. The defendant traders capitalised on this advantage by initiating trades before the press releases were issued to the public. The defendant traders bought or sold securities depending on their anticipation of how the market would respond to the information in the stolen press releases,” said a note from the SEC.

The latest hacking took place as recently as May 2015.

“The lesson in this is your information is only as secure as the people you share it with. If you share that information with a news service, a PR firm or even a law firm, then you need to make sure that it’s secure,” said Matthew L. Schwartz, a former federal prosecutor in New York, quoted in the AP article.

According to the article, Business Wire has hired a cybersecurity firm to test its systems. PR Newswire has said it is cooperating with the investigation.

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