Embargoed PR, Hacked For Insider Trading Info, Nets Millions

In a case that “exemplifies the way insider trading has been quietly revolutionized by the internet,” Ukranian hackers siphoned off embargoed public relations releases and, made a killing, in an ongoing operation involving numerous other players in Russia and the U.S. taking a cut. This scheme, one of three big hits on U.S. business newswires in recent years, has been characterized by law enforcement as one of the largest securities fraud cases ever in the United States, and possibly the largest ever. None of those involved were insiders in the conventional sense. “Hackers,” this article explains, “can take their pick of security weaknesses: a large corporation or bank may have good in-house security, but the entities it works with — such as financial institutions, law firms, brokerages, smaller investment advisories, or, in this case, newswires — might not.” This article goes into detail about a case that is said to have Moscow-based middlemen, involve rogue elements of the Ukrainian intelligence services and a major participant who was a pastor with the U.S.-based Slavic Baptist church. As one of the commenters points out, this account reads more like a book than a blog post, but it appears to be meticulously researched and for all it’s complexity, the core insider trading ploy is often simple enough, per the following excerpt. It details what amounts to a small episode in a much larger scheme that prosecutors say went on for years: “On August 3rd, 2011, a press release from Dendreon Pharmaceuticals was uploaded on PR Newswire at 3:34 PM and published less than 30 minutes later at 4:01 PM, just after the markets closed. The release announced the company’s new drug would not meet its forecasted sales target. At 3:56 PM, when it had yet to be published and four minutes before the markets closed, Korchevsky purchased 1,100 put options, a contract giving the ability to sell the stock at a specific price within a specific time period. The next day, Dendreon’s stock fell 67 percent and Korchevsky sold his put options for a profit of more than $2.3 million.” Korchevsky, who is a trader and pastor in the Slavic Baptist church, was found guilty and is awaiting sentencing. His supporters continue to maintain he is an innocent God-fearing man and prosecutors admit no PR documents were found on his computer. His case is based on trading patterns, emails, and chats.