Securities Industry Commentator by Bill Singer Esq

January 16, 2019

SEC Brings Charges in Edgar Hacking Case (SEC Press Release 2019-1)

In a Complaint filed in the United States District Court for the District of New Jersey ("DNJ"), the SEC charged alleged Ukrainian hacker Oleksandr Ieremenko, six individual traders in California, Ukraine, and Russia, and two entities.with participating in a previously disclosed scheme to hack into the SEC's EDGAR system and extract nonpublic information to use for illegal trading. The Complaint alleges that Ieremenko and some of the traders were also involved in a similar scheme to hack into newswire services and trade on information that had not yet been released to the public. The Complaint alleges that after hacking the newswire services, Ieremenko extracted EDGAR files containing nonpublic earnings results and passed said information to individuals who allegedly traded within the  narrow window between when the files were extracted from SEC systems and when the companies released the information to the public. In total, the traders allegedly traded before at least 157 earnings releases from May to October 2016 and generated at least $4.1 million in illegal profits. 
United States Securities and Exchange Commission, Plaintiff, v. Olekesandr Ieremenko, Spirit Trade, Ltd, Sungjin Cho, David Kwon, Igor Sabodakha, Victoria Vorochek, Ivan Olefir, Capyield Systems, Ltd, and Andrey Sarafanov, Defendants; -- and -- Kyungja Cho, Lyudmila Kalinkina, Andrey Meleynikov, and Ivan Solovev, Relief Defendants. (Complaint, United States District Court for the District of New Jersey, 19-CV-505) 
READ the SEC Complaint   

In a 16-count indictment filed in DNJ,  Artem Radchenko and Oleksandr Ieremenko are charged with securities fraud conspiracy, wire fraud conspiracy, computer fraud conspiracy, wire fraud, and computer fraud. The Defendants allegedly hacked the SEC's EDGAR system and stole thousands of files, including annual and quarterly earnings reports containing confidential, non-public, financial information, which publicly traded companies are required to disclose to the SEC. The defendants and others then profited by selling access to the confidential info in these reports and trading on this stolen information prior to its distribution to the investing public. United States of America v. Artem Radchenko and Oleksandr Ieremenko (Indictment, DNJ)
READ the Indictment

Man Bites Dog. Stockbroker Sues Customer. Dog and Customer Bite Back ( Blog)
Folks wear lots of hats on Wall Street. You got your stockbrokers. You got your investment advisers or advisors or however the hell you prefer to spell it. You got lots of confusing and redundant titles like financial consultants and financial advisors and let's not even get into the myriad of vice presidents. At times, a "customer" may be dealing with a stockbroker; and other times with a investment advisor representative; and at times with both. Of course, what would Wall Street be without lawyers and our penchant for generating lots and lots of documents. Accordingly, every time a customer opens a new account, wham, ya got new account paperwork with lots of paragraphs, clauses, and provisions. Unfortunately, sometimes that paperwork explosion blows up on the very parties who have signed their names, multiple times, on many dotted lines. In a recent lawsuit, we have a stockbroker/investment advisor suing his broker-dealer/RIA customer. The broker-dealer account requires arbitration but the investment advisory account doesn't. Anyone got a coin to flip?