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Federal Authorities Charge Nine Individuals in ‘Unprecedented’ $30M Hacking and Insider Trading Scheme

Secretary of Homeland Security Jeh Johnson Tuesday
Secretary of Homeland Security Jeh Johnson / AP
August 11, 2015

Federal authorities on Tuesday announced charges brought against nine individuals involved in a five-year insider trading scheme that generated $30 million in illicit profits.

The Wall Street Journal reported that the scheme, which began in 2010 allegedly in chat rooms, involved traders relying on Eastern European hackers to gain early access to confidential news releases from various corporations, including multiple Fortune 500 companies. Those complicit were then able to trade on the confidential information before it was made public.

Federal officials in Brooklyn and New Jersey announced the criminal charges during a news conference in Newark Tuesday morning, at which Secretary of Homeland Security Jeh Johnson, Securities and Exchange Commission Chair Mary Jo White and Secret Service Director Joseph Clancy were also present.

During the press conference, White labeled the scheme "unprecedented, in terms of the scope, the hackers at issue, the number of traders involved, the number of securities unlawfully traded and the amount of profits generated."

According to sources close to the investigation, some of the individuals charged in the scheme were arrested by the FBI Tuesday morning, while others--including hackers located in Ukraine--have not been apprehended.

Authorities have seized 17 brokerage accounts suspected of holding $6.5 million in addition to a house boat, a shopping center, an apartment building and 12 other properties in the investigation.

The hackers breached systems of news-wire services to pilfer over 150,000 news releases, on at least 800 of which the traders made deals. The hackers were compensated for their work based on the amount of money generated by the trades.

The Securities and Exchange Commission, which announced related civil charges against 32 individuals Tuesday, priced the illicit profits much higher at $100 million.