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Charges Expected Tuesday in Hacking and Insider Trading Cases

Charges Expected Tuesday in Hacking and Insider Trading Cases

By Reuters | Updated: 11 August 2015 10:10 IST

Federal authorities in Brooklyn and Newark are planning to announce indictments Tuesday in a rare case tying together hacking and stock market trades.

The Securities and Exchange Commission, Federal Bureau of Investigation and Secret Service have all been involved in the matter, a person familiar with the probe told Reuters.

The core matter is a computer security breach that retrieved material financial information from the target. That information was then used to make advantageous stock transactions, which federal authorities have said is a form of insider trading.

The United States Attorney for the Eastern District of New York worked with the SEC and the FBI on the trading aspect, while the U.S. Attorney for New Jersey focussed on the hacking, the person said.

Representatives for the SEC and FBI did not respond to requests for comment, while a Secret Service spokesman could not be reached.

No further details were immediately available, but the source said the case is not believed to be related to the ongoing SEC investigation of insider trading tied to a hacker group that has been dubbed FIN4.

As reported in June, FIN4 tried to break into email accounts of more than 100 companies and made off with material information on mergers and other issues.

"Failures in cyber-security have prompted a dangerous new method of unlawful insider trading," former SEC Internet enforcement chief John Reed Stark said in June.

Both the FIN4 case and the new one are seen as potentially more dangerous than a more common sort of electronic break-in connected to stock trading.

In those cases, hackers took over electronic brokerage accounts and used them to profit as part of "pump and dump" schemes, in which penny stocks or other thinly traded securities are hyped by email, boiler rooms or other operations and then sold at a peak.

The SEC is concerned that much bigger companies and the credibility of the broader market could be hurt if a consistent path to criminal profits is established.

© Thomson Reuters 2015

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