Nine Charged In $30 Million Press Release Hacking Scheme

Nine people have been charged in a massive international hacking scheme designed to steal unpublished press releases from business newswires and use the information to make profitable insider trades.

Federal authorities in New York and New Jersey unsealed two indictments today that found the alleged hackers to have generated $30 million in illegal profits, the largest known computer hacking and securities fraud scheme ever prosecuted in the U.S.

The defendants were charged with stealing around 150,000 press releases from the servers of three newswire companies, many of which contained non-public information about companies traded on the NASDAQ and NYSE. They made millions by allegedly using more than 800 stolen press releases to trade ahead of their public release.

Five of the defendants were arrested in the U.S. this morning, while international arrest warrants were issued for four others currently based in Ukraine.

According to the indictments, two of the defendants hacked the computer networks of Marketwired L.P., PR Newswire Association LLC, and Business Wire beginning in February 2010, at one point even chatting online about their coups. Once their infiltration was successful, they allegedly shared the logins with their co-conspirators, along with instructions on how to access the overseas servers.

Home Depot, Panera Bread and Hewlett Packard were among the hundreds of companies whose information was traded in the press releases.

Vitaly Korchevsky, 50, Vladislav Khalupsky, 45, Leonid Momotok, 47, Alexander Garkusha have been charged with wire fraud conspiracy, securities fraud conspiracy and money laundering conspiracy. They face a maximum potential penalty of 20 years in prison and a $250,000 fine, according to the Department of Justice.

“The defendants were a well-organized group that allegedly robbed the newswire companies and their clients and cheated the securities markets and the investing public by engaging in an unprecedented hacking and trading scheme,” U.S. Attorney Paul Fishman said in a statement. “The defendants launched a series of sophisticated and relentless cyber attacks against three major newswire companies, stole highly confidential information and used to enrich themselves at the expense of public companies and their shareholders.”