Unprecedented Hacking and Trading Scheme Highlights Key Cybersecurity Lessons

King & Spalding

On Aug. 11, 2015, federal prosecutors in the District of New Jersey and the Eastern District of New York unsealed indictments against nine individuals in the U.S. and Ukraine who were allegedly involved in a five-year, widespread hacking and trading scheme. On the same day, the Securities and Exchange Commission filed a complaint in federal district court in New Jersey making similar allegations. The defendants allegedly hacked into major news wires that distribute press releases, stole advance, not yet public copies of financial press releases, and traded on the basis of the information, reaping over $100 million in unlawful profits.

I. An Unprecedented Hacking and Trading Scheme -

According to the indictments and parallel SEC civil complaint, the scheme involved two key groups of defendants. The first group is alleged to be comprised of sophisticated hackers who broke into the computer and data networks belonging to PR Newswire, Business Wire, and Marketwired. The hacking team allegedly used brute force attacks, SQL injection attacks, and phishing attacks to gain access to the media organizations’ networks, and then after illegally obtaining access they stole advance, nonpublic copies of financial press releases. Hundreds of publicly traded companies, including some of the biggest names in corporate America, use these three media services to disseminate news to the market place, including earnings reports and other financial information. As standard practice, publicly traded companies may send current versions of their financial press releases to the media services several minutes to several days before publication.

Originally published in Daily Report for Executives on September 8, 2015.

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