[JURIST] The US Securities and Exchange Commission (SEC) [official website] on Tuesday indicted [press release] an international web of hackers and traders who stole information from press releases prior to publication and traded on said information, making over $100 million in illegal profits. The SEC filed the complaint against 32 defendants on Monday in the US District Court for the District of New Jersey [official website], which entered an asset freeze that day. In the SEC’s release, it was noted that “this international scheme is unprecedented in terms of the scope of the hacking, the number of traders, the number of securities traded and profits generated.” According to the complaint, hackers hid their intrusions and recruited traders with videos documenting their ability to steal such information prior to public release, which the traders could then use to their benefit in the stock market. In return, the traders paid the hackers a share of the profits. The complaint charges violations of anti-fraud laws and related SEC anti-fraud rules, “and seeks a final judgment ordering the defendants to pay penalties, return their allegedly ill-gotten against with prejudgment interest, and be subject to permanent injunctions from future violations of the anti-fraud laws.”
Insider trading is a concern for US securities regulators. In April the US Supreme Court denied [JURIST report] an appeal brought by Rajat Gupta, the former director of the Goldman Sachs Group Inc, for his 2012 insider trading conviction. Gupta was convicted [JURIST report] on three counts of securities fraud and one count of conspiracy to commit securities fraud in June 2012. The convictions rested largely on telephone conversations between Gupta and Raj Rajaratnam, head of the Galleon Group hedge fund firm where Gupta disclosed financial and investor information of Goldman Sachs. Gupta was sentenced to two years in prison, one of supervised release, and ordered to pay $5 million dollars in fines. Rajaratnam was convicted in 2011 and sentenced [JURIST reports] to 11 years in prison and $64 million dollars in fines, the largest sentence to ever be awarded for insider trading. Rajaratam appealed to the Second Circuit in 2013, but the conviction was upheld [JURIST report].