SEC settles with two traders in EDGAR hacking case

Maria Nikolova

David Kwon and Igor Sabodakha allegedly profited from trading on nonpublic corporate earnings information hacked from the SEC’s EDGAR system.

More than a year has passed since the United States Securities and Exchange Commission (SEC) charged 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. Today, the regulator announces settlements with David Kwon and Igor Sabodakha, two traders who allegedly profited from trading on nonpublic corporate earnings information hacked from the SEC’s EDGAR system.

According to the SEC’s complaint, Kwon and Sabodakha allegedly traded on the basis of the hacked information in the narrow window of time between when the files were extracted from EDGAR and when the information was released to the public. Sabodakha allegedly previously traded based on material nonpublic information obtained through the hack of at least two newswire services.

Kwon and Sabodakha consented to the entry of final judgments that would permanently enjoin them from violating the antifraud provisions of the securities laws.

Kwon agreed to pay $165,474 in disgorgement, representing the profits from his illegal trades, and $16,254 in prejudgment interest. The settlement reserves the issue of a civil penalty for Kwon for further determination by the court upon a motion of the SEC.

Sabodakha agreed to disgorge $148,804 in profits from his illegal trades, including trades he conducted in the account of his wife, Victoria Vorochek, with prejudgment interest of $20,945. Sabodakha also agreed to pay a civil penalty of $148,804.

The settlement agreements with Kwon and Sabodakha are subject to court approval.

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