SEC charges nine defendants for participating in scheme to hack EDGAR system

Maria Nikolova

The SEC charged a Ukrainian hacker, six individual traders in California, Ukraine, and Russia, and two entities.

The United States Securities and Exchange Commission (SEC) has earlier today announced charges against nine defendants who allegedly participated in a scheme to hack into the SEC’s EDGAR system and extract nonpublic information to use for illegal trading.

The SEC charges target a Ukrainian hacker, six individual traders in California, Ukraine, and Russia, and two entities. The regulator explains that the hacker 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 SEC charged the hacker and other traders for that conduct in 2015.

The SEC’s complaint alleges that after hacking the newswire services, Ukrainian hacker Oleksandr Ieremenko turned his attention to EDGAR and, using deceptive hacking techniques, gained access in 2016. Ieremenko extracted EDGAR files containing nonpublic earnings results. The information was passed to individuals who used it to trade in 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 traded before at least 157 earnings releases from May to October 2016 and generated at least $4.1 million in illegal profits.

According to the SEC’s complaint, Ieremenko circumvented EDGAR controls that require user authentication and then navigated within the EDGAR system. Ieremenko obtained nonpublic “test files,” which issuers can elect to submit in advance of making their official filings to help make sure EDGAR will process the filings as intended. Issuers sometimes elected to include nonpublic information in test filings, such as actual quarterly earnings results not yet released to the public. Ieremenko extracted nonpublic test files from SEC servers, and then passed the information to different groups of traders.

The SEC’s complaint alleges that the following traders received and traded on the basis of the hacked EDGAR information:

  • Sungjin Cho, Los Angeles, California
  • David Kwon, Los Angeles, California
  • Igor Sabodakha, Ukraine
  • Victoria Vorochek, Ukraine
  • Ivan Olefir, Ukraine
  • Andrey Sarafanov, Russia
  • Capyield Systems, Ltd. (owned by Olefir)
  • Spirit Trade Ltd.

In a parallel action, the U.S. Attorney’s Office for the District of New Jersey today announced related criminal charges.

The SEC’s complaint charges each of the defendants with violating the federal securities antifraud laws and related SEC antifraud rules and seeks a final judgment ordering the defendants to pay penalties, return their ill-gotten gains with prejudgment interest, and enjoining them from committing future violations of the antifraud laws. The SEC also named and is seeking relief from four relief defendants who profited from the scheme when defendants used the relief defendants’ brokerage accounts to place illicit trades.

Read this next

Digital Assets

Kraken exits Middle East, closes UAE office

Digital currency exchange Kraken will close down its operations in Abu Dhabi, UAE and lay off the majority of its team focused on the Middle East and North Africa.

Industry News

CFTC comments on ION Cleared Derivatives issues after Russian-linked hack

“The ongoing issue is impacting some clearing members’ ability to provide the CFTC with timely and accurate data. As this incident unfolded, it became clear that the submission of data that is required by registrants will be delayed until the trading issues are resolved.”

Industry News

FCA took down 14 times more misleading ads in 2022 thanks to technology

The FCA has made significant improvements to the digital tools it uses to find problem firms and misleading adverts. These improvements have enabled it to work through a much larger number of cases compared with 2021.

Executive Moves

HKEX appoints ex-Goldman Sachs Matthew Cheong to lead platform’s focus on derivatives

“He has worked for a number of the world’s leading investment banks and his experience will be invaluable to HKEX as we continue to enhance our derivatives product offerings and build on our innovative and robust platform business, connecting capital with opportunities.”

Digital Assets

Zodia Custody and SBI Digital Asset Holdings launch JV for crypto asset custodian in Japan

“Zodia Custody is both proud and excited to be working with SBI DAH to help set up SBI Zodia Custody; the first tier 1 crypto asset custodian for institutions in Japan.”

Digital Assets

Paxos opens R&D center in Israel to focus on transaction signing and crypto custody security

“Paxos is looking to expand its team in Israel in 2023 and beyond, giving engineers the opportunity to work on cutting-edge financial products and shape the future of the global economy.”

Executive Moves

Stash appoints Liza Landsman as CEO to further grow investing app

Stash is an investing and banking app with over 2 million active subscribers. Its subscription plans start at just $3 a month, and offer a range of products including investing, banking, education, and advice.

Institutional FX

Invast Global ramps up its offering with 10 soft commodity CFDs

Sydney-based prime-of-prime provider Invast Global has expanded its offering with the addition of ten soft commodity CFDs, which increases their index and commodity CFD offering to 35 instruments.

Retail FX

FF Simple and Smart Trades says Goodbye to CySEC authorization

The Cyprus Securities and Exchange Commission (CySEC) confirmed that it has wholly withdrawn the Cyprus Investment Firm (CIF) licenses of FF Simple and Smart Trades Investment Services Ltd.

<