The $30 million press releases: Breaking embargoes for fun, profit, and criminal charges
If, like I do, you subscribe to daily emails from the press release service EurekAlert!, you may have noticed this boilerplate at the top of those emails:
Please note further that anyone using embargoed information for trading purposes may be in violation of the Securities Exchange Act.
If you’ve ever wondered what that was about, an Associated Press (AP) story explains in mind-blowing detail today.
Here’s the lead of the story from the AP, about what Federal authorities called “the biggest scheme of its kind ever prosecuted, and one that demonstrated yet another way in which the financial world is vulnerable to cybercrime:”
An international web of hackers and traders was charged by U.S. authorities Tuesday with making $100 million by breaking into the computers of business newswire services, reading corporate press releases before they came out, and then trading on that information ahead of the pack on Wall Street.
The Feds indicted nine people in the U.S. and Ukraine on “federal criminal charges, including securities fraud, computer fraud and conspiracy,” the AP reported, saying the nine made $30 million in profit. The Securities and Exchange Commission also brought civil charges against those nine, “plus 23 other individuals and companies.”
The scheme involved releases issued by Marketwired, PR Newswire, and Business Wire; neither EurekAlert! nor other typical science journal release sites are mentioned. But journals, particularly those about clinical medicine, frequently publish results that can change stock prices, so it’s not unreasonable for them to include a notice about the SEC and related regulations. Nature‘s terms and conditions, for example, includes this:
You agree and acknowledge that any Materials may contain sensitive or confidential information not yet disclosed to the public. Using, sharing or disclosing such Materials to others in connection with securities dealing or trading may be a violation of insider trading under the laws of several countries, including, but not limited to, the UK Financial Services and Markets Act 2000 and the US Securities Exchange Act of 1934, each of which may be subject to penalties and imprisonment.
Hat tip: David Kroll