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Stock Traders & Hackers Make $100 Million With Inside Trading

Insider TradingThere have been numerous instances where insider trading has occurred and investigators have filed charges involving securities fraud schemes and brought the perpetrators to justice.

For the first time U.S. authorities unearthed a scam involving stock traders and hackers who joined forces to generate insider trading information that allowed them to make over $100 million during the last 5 years.

Most of the stock brokers were located in the United States and the hackers were based out of Ukraine. The plot was very simple as the hackers successfully some of the biggest PR websites on the internet such as PR Newswire, Business Wire and Marketwire to hack into their database of press releases. Over the last 5 years, hackers managed to get access to over 150,000 press releases before they could be published and then shared the stolen information with stock brokers who played the stock market and pocketed the windfall.

The stock brokers would send out a ‘shopping list’ to the hackers in the Ukraine informing them of what press releases they would like to view. The hackers would then access these unpublished press releases and pass them on to the stock brokers. The hackers also created a video tutorial showing traders how to view the stolen press releases and in return for their services were paid a percentage of the profits made by the stock brokers.

The U.S. Securities and Exchange Commission has filed a lawsuit against 15 companies and 17 individuals for hacking and insider trading. Authorities have arrested 9 people from New York, New Jersey, Newark and Brooklyn as they are accused of making over $30 million in illegal trading starting from 2010. Five individuals outside the U.S. were also arrested and international arrest warrants for the remaining accused have also been sanctioned.

Some of the companies that were targeted by the hackers and stock brokers include Hewlett-Packard Co (HPQ.N), Caterpillar Inc (CAT.N), Panera Bread Co (PNRA.O), Dendreon Corp, Edwards Lifesciences Corp (EW.N), Dealertrack Technologies Inc (TRAK.O), Align Technology Inc (ALGN.O) and Home Depot Inc (HD.N).

Business Wire which is a part of billionaire Warren Buffett’s Berkshire Hathaway Inc was one of the websites to be hacked. The company released a statement which said

Despite extreme vigilance and commitment, recent events illustrate that no one is immune to the highly sophisticated illegal cyber-intrusions that are plaguing every aspect of our society.