Guilty Plea Entered in Newswire-Hacking Insider Trading Case
Hacking and insider trading: Two criminal tastes that seem to taste great together—if ethics charges are your dish of choice. A Georgia-based man has pleaded guilty to participating in the $100 million insider trading scheme that involved hacking into commercial news distribution services.
Alexander Garkusha, who authorities say traded on inside information, pleaded guilty in federal court in Brooklyn, New York, to conspiracy to commit wire fraud, becoming the first defendant criminally charged in the case to admit wrongdoing.
"I am very sorry I did this," Garkusha said in court, according to Reuters. "I know that it was against the law."
In August it came to light that an international ring of con men and criminals managed to make $100 million in the stock market by gaining advance access to press releases set to be sent across the wire by PR Newswire, Business Wire and Marketwired. Phishing was the initial vector.
The campaign lasted from 2010 until this last May—a five-year period during which more than 150,000 press releases with earnings figures and other market-impacting corporate information were pilfered and analyzed prior to their release—offering market brokers an opportunity to make some very savvy investments, hours to three days ahead of the game.
For instance, on one day in 2013 the group was poised for a positive earnings report from Panera Bread—and proceeded trading more than 75,000 shares in a little over an hour to make $900,000.
For his part, Garkusha, an executive at Alpharetta, Ga.-based real-estate developer, said that he made $125,000 trading in stocks over a three-month period, using corporate press releases obtained before they were released publicly.
Garkusha was arrested in August. The feds have detained a mixed crew of hackers and stock traders in the case, charging nine people in the US and Ukraine with federal criminal charges, including securities fraud, computer fraud and conspiracy. The Securities and Exchange Commission also brought civil charges against the nine, plus 23 other people and companies in the US and Europe. Prosecutors said the defendants made $30 million from their part of the scheme.
Charges remain pending against four other defendants, on indictments filed in Brooklyn and Newark, New Jersey: Arkadiy Dubovoy, Igor Dubovoy, Leonid Momotok and Vitaly Korchevsky. They have all pleaded not guilty.
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Source: Information Security Magazine