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EARLIER THIS WEEK, US authorities charged 32 people and companies with an elaborate five-year hacking and trading scheme that made them $100 million and is being called the biggest ever of its kind.
The key to the alleged plot, which reads like something from the Hollywood film The Wolf of Wall Street, was almost unbelievably simple – press releases.
Here’s how one man and his family almost pulled off “one of the most intricate and sophisticated trading rings” in American history.
Half a million dollars in 36 minutes
On the morning of 23 July 2013, Panera, an American chain of wholesome bread and soup restaurants, prepared a statement.
It was to announce the company was adjusting its earnings expectations downward for the recently begun fourth financial quarter.
A strong earnings report or other positive news can cause a company’s stock to rise, while disappointing news can make it fall.
The release was just like countless others sent by publicly traded companies to business news services, that day.
Except for one thing.
As an unsuspecting investing public awaited the announcement, US federal authorities say a group made up of computer hackers and stock traders had already seen the release in the wire service’s computer system.
Then came short selling and CFDs by nine different individuals, hedge funds and stock brokers all charged with fraud this week, all using information contained in Panera’s press release.
In those six hours, members of the alleged insider trading ring made $2.4 million on a stolen press release.
In another incredible example, the group made $511,377 in profits from short selling and CFDs on a California-based technology company.
Between the time the press release was sent to the wire service, and the time it went public, there were just 36 minutes.
The Dubovoy Group
According to a criminal indictment made public on Tuesday, the operation revolved around Arkadiy Dubovoy, a 50-year-old Ukrainian businessman who lives in the US state of Georgia.
The complaint brought by the Securities and Exchange Commission (SEC), claims Dubovoy and his family, including 28-year-old son Igor, orchestrated the trading component of the plot.
They traded stocks in their own names, via companies they owned, and through four “straw owners” – a company director in name only, used to conceal the true owner’s identity.
The group used mainly construction companies, investment brokerages, and an advertising firm.
In one case, Dubovoy allegedly set up a trading account in the name of a Ukrainian ice-cream company manager.
The Hackers
The hacking component of the operation was allegedly run by two young Ukrainians working from Kiev – Oleksander Ieremenko (23) and Ivan Turchynov (27).
According to the charges, they used proxy servers and multiple online aliases to hide their intrusions into the networks of financial wire services.
They also posed as employees and customers of the news wires, and used phishing attacks (tricking actual employees into clicking links and revealing account passwords).
The hackers, led by the Ukrainian duo, even bragged about their ability to steal the non-public press releases, emailing video demonstrations to traders, in order to recruit them and persuade them to pay for the information.
The hackers would then distribute embargoed press releases among around two dozen trading companies in the US, Ukraine, Russia, France, Malta, Cyprus and the British Virgin Islands.
Once the trades were made, those companies would then funnel a portion of the profits back to the hackers, as their commission.
In total, the international hacking scheme allegedly raked in $100 million between 2010 and 2015, as SEC Chair Mary Jo White explained:
This international scheme is unprecedented in terms of the scope of the hacking, the number of traders, the number of securities traded and profits generated.
Andrew Ceresney, Director of the SEC’s Division of Enforcement, added:
This cyber hacking scheme is one of the most intricate and sophisticated trading rings that we have ever seen, spanning the globe and involving dozens of individuals and entities.
Authorities said that beginning in 2010 and continuing as recently as May, they gained access to more than 150,000 press releases that were about to be issued by Marketwired in Toronto; PR Newswire in New York; and Business Wire of San Francisco.
The press releases contained earnings figures and other corporate information.
The case should sound a warning for anyone who uses email in a work setting, Paul Fishman, U.S. attorney for New Jersey, said on Tuesday.
Every employee of every company has to be vigilant about the emails they get from people who look like their friends or acquaintances, urging them to click on a link.
They should say to themselves every time that happens, ‘That seems like a really bad idea.’
Five defendants were arrested in the U.S. on Tuesday, and warrants were issued for four others in Ukraine.
The most serious charges in the indictment, wire fraud and securities fraud, carry up to 20 years in prison.
The SEC lawsuit named 17 individuals and 15 companies in the U.S. and abroad, in such places as Russia, France, Malta and Cyprus.
The agency is seeking unspecified fines and restitution against the 32 defendants.
To read the SEC’s detailed complaint in full, scroll down or click here.
Contains reporting by the Associated Press.
http://cdn.thejournal.ie/media/2015/08/comp-pr2015-163-1.pdf
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Great. Posting a cheque. What year is this? 1990?
@Finbarr Brady: you forgot you are in Ireland
Why send cheques that’s going to cost 5? Million € . Transfer the funds back into bank accounts. Who uses cheques now days . Electronic banking is more used now than ever They seem to be making things difficult & wasting even more money that could be spent on infrastructure. Again abolish Irish water and set up a division in each of local county councils to carry out repairs etc it’s just waste after waste with this gov & it’s the us the tax payers yet again . I do also understand that older ppl don’t do on line banking . Maybe offer a cheuque or transfer. Something not making sense with this operation.
@Keith: perhaps because there were more ways than electronic funds transfer to pay the bill and after the uproar when IW requested PPS numbers I’d say they don’t want to ask people for bank details.
Can someone tell me how much this will have cost us (consultancy fees, Irish water dept, water meter installation, policing protests, court cases, refunds and so on) 2/300 million? How many people could we get off hospital trolleys with that kind of money?
@Alan Madden: probably zero in this country
I remember the blitz and even avalanche of comments that the vast majority had paid their water charges, that everyone would have to pay very soon , the threats that there would be disconnection of water supply, huge fines, penalties, criminal convictions for non payment of water charges and all kinds of alarmist threats and promises. Nothing materialized.
The refund shows that the water charges are dead and buried at least for now.
One should never concede to threats. Once threatened, no concession.
@Fiona deFreyne: what you have said is mostly true. I was happy to pay for water though even if I was in a minority. I like the consumer pays principle and I also like the way IW’s income stream would be independent and that they would fix the leaks around the country and modernise the entire network. IW itself I wasn’t fond of and think it didn’t do itself many favours from the onset. But if it had been done right I would have been okay with the concept.
@Sean: if it had been done honestly, fairly, without PPS number and a proper exemption for those on low incomes paid to a statutory corporation which could not be privatised and a proper financial model, I would have been persuaded but when I was give 3 different and conflicting reasons for demanding my PPS number, I recognised it was a phishing scam.
When I heard the threats I got really angry and marched.
@Fiona deFreyne: I have seen the water meters being introduced in Europe. It was a simple operation, one house or apartment fitted within ten to 15 min by two workers. What was happening here was a lovely example how to mismanage funds. They spent probably more money on installation of the meters than in entire Germany with a population of 80 million plus.
@Fiona deFreyne: Agree.
Trickle Trickle in a Jar
Uncle Phil you went too far
Accusing us of being polluted
Water never made us flutered
I always paid for my publicly delivered water services in my Motor Tax. Then I had to pay for everybody else in 2008 when my motor tax went up from €350 p.a. to €1072 p.a. because I couldn’t afford a new “low CO2″ car and still drive an old “petrol” car – not a diesel soot polluter!
Trickle Trickle Motor Tax
Taken for to fund the Jax
Paying once is very Slick
But paying twice takes the Mick
Ireland a sad place.
@Jindrich Marz: also when looking into to meters they were using, they second hand, and when i rang Irish water to ask for the calibration certificate for my meter, they told me they weren’t calibrated….
Complete amateur mess….
How many “customers” did Irish Water originally claim?
@Dave C:
Eurostat ridiculed Irish Water/CSO/FG’s claims.
@Dave C: I was thinking exactly the same. 1.23 million according to this: http://www.thejournal.ie/irish-water-customers-registered-around-the-country-2001548-Mar2015/. Why am I not surprised. Irish water cant count either just like the Gardai.
@Ian Oh: eligible customers probably refers to those that actually paid, hence the lower figure
@Ian Oh: That story you’ve linked says 990,000 IW customers also. 1.23 mil includes people who registered but who are on group schemes.
Lol, this will be interesting
Not been rude i did not register,did not put in for the conservation grant,as far as im consernd iw does not exist
@Sandra Clifford: your not been rude you had sense like I & half of country I just hope ppl learn after this & that Fine Gael get punished next election for this mess
None are Customers of the Scam… IW is a Scam….. none intend to become ‘ Customers ‘ of IW… abolish IW. Give Water back to CO Councils.. the people pay€ 1.4 plus billions per year. None will pay again.
Posting cheques,more squandering of money.but it’s so easy when it’s public money.
If nothing else they are consistent!
Complete clusterf#@*k
They have decided to turn the refunds down to a trickle!
Always remember and never forget those who covet your childrens water!
No votes for Pro Irish Water parties, FG, FF, Lab, Greens
Not even a 10th choice!
Phil Hogan got in on the 13 th count, Alan Kelly on the last!
Customer???..Lol. what a shambles. Imagine a company spending hundreds of millions to send out billings to customers, then spending more money giving that money back!!..
@Dj: So you’d prefer they didn’t give it back or what?
@Ryan Boyle: Wouldn’t bother me either way.
@Dj: I bet you’d find something to moan about.
@Ryan Boyle: I found your sister,so ya!
@Ryan Boyle: I would like to see the process being ‘opt in’ for return of monies and if you didn’t opt in by the end of the year all of your entitlement was shifted to Focus Ireland and see some good being done.
Would allow the people of Ireland to send out a huge message.
Why does the government want every single detail about you, why???
@Alois Irlmaier:
You don’t think it already knows your PPS number??
I hate that smug bas#×rd. I tell my kids not to use the hate word but god i really do hate that slug.
@garry murphy: he is not just smug, he is a big bully boy.
Phil Hogan : smugness personified,”Cheers me dears”
I was not stupid enough to pay in the first place
@Sandra Clifford: Some people had no other choice. People selling their house to buy another were told they had to pay. I was one of them. The solicitors for both parties said no contracts would be signed unless water charges were paid. If I said no then I’d be still living in a place I didn’t want to live in. You can pucker out your chin and yell NO all you want but you wouldn’t be able to sell your house.
That’s great. I’ll get it back just in time for Christmas also with the reduction in the property tax it will be a very merry Christmas
I beleive people should pay for water, but, talk about reward for abject Failure”? Just looking at, and listening to that over paid, Bull in a China Shop, CLOWN, that is Phil Hogan would turn one’s stomach and make one change one’s mind. Yet another one of Fine Gael’s and Enda Kenny’s idiotic appointments !
@Randal McNally: I agree water services have to be paid for BUT ..
Trickle Trickle Motor Tax
Taken for to fund the Jax
Paying once is very Slick
But paying twice takes the Mick
I have always paid for my public water services and now pay for other’s also since 2008 when my Motor Tax went up from €350 p.a. to €1072 p.a. What an unfair unjust system of tax. A sad place Ireland!
I was living with family and paying half the charges. Definitely should be returned through the bank accounts. I’ll never see it otherwise.
What a waste giving 100e back to the public could we not spend it on something else.
@dangermouse: sorry, may be mid reading, are you suggesting not to give out the refunds ?
Didn’t register didn’t pay stayed with the winners so don’t have to worry about a refund #wewontpay
Hogan must be prat # 1. He will surely go down in Irish political history as the biggest turd ever.
This is what happens when you privatise water!
Do they deduct the €100 grant received from the total amount paid to IW?
@Samantha Gillingham: no. Why would they when Kelly clearly stated it had nothing to do with IW
What’s this “our customers” crap.
@mrmeade: They have to call you something. That’s how language works.
No details, no cheque, no meter no problem.
Trickle Trickle Water Grant
Greasing palms to stop the Rant
Beggars craving for a Crust
Took the soup, pay you Must
Keep the monies and use it to upgrade Merlin Park hospital to make a great hospital in the west
Oh my God, you mean they’ll need to know where I live and what name to put on the cheque? The horror!
BE very careful of giving these b/&€Rd’s any personal details your refund may be small change towards your new bill
Ensure your details are correct, or they’ll send big Phil round to yours to sort you out and reduce you to a trickle…..Look at him there the haemorroid
As I got the conservation grant, I’ll be up a €100, which is nice.
Get a PSC card and identify yourself to Irish Water. They’ll get out pps numbers someway.
Maybe they are sending Hogan as well
We thought the Voting Machines were a fiasco only in the ha’penny place compared to Hogans /Kelly’s Irish Water
5 Million! Another waste of money. I for one have no problem paying for water as long as it’s run properly and there are no outrageous wages or bonuses. But the whole set up and approach was an absolute joke.
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