The United States’ (U.S’) Securities and Exchange Commission on Monday announced fraud charges against five Russian nationals for engaging in a multi-year scheme to profit from stolen corporate earnings announcements obtained by hacking into the systems of two U.S.-based filing agent companies before the announcements were made public.
A statement by the commission relating to the frauds indicated that the filing agents assist publicly traded companies with the preparation and filing of periodic reports with the SEC, including quarterly reports containing earnings information.
The investment market regulatory commission stated that its complaint, filed in federal district court in Massachusetts, alleged that defendant Ivan Yermakov used deceptive hacking techniques to access the filing agents’ systems and directly or indirectly provided not-yet-public corporate earnings announcements stolen from those systems to his co-defendants Vladislav Kliushin, Nikolai Rumiantcev, Mikhail Irzak, and Igor Sladkov.
According to the complaint, from 2018 through 2020, the traders used 20 different brokerage accounts located in Denmark, the United Kingdom, Cyprus and Portugal to generate profits of at least $82 million using the stolen information to make trades before over 500 corporate earnings announcements.
The defendants allegedly shared a portion of their enormous profits by funneling them through a Russian information technology company founded by Kliushin and for which Yermakov and Rumiantcev serve as directors.
Commenting on the charge, Director of the SEC’s Division of Enforcement, Gurbir Grewal, explained: “With this action, the SEC, using its powerful analytical tools, has exposed a highly sophisticated and deceptive scheme to steal and monetize non-public corporate information.
“While we remain steadfast in our commitment to protect the integrity of our securities markets against bad actors no matter where they are located or what sophisticated tactics they use, we strongly encourage companies to shore up their safeguards against, and remain vigilant for cyber breaches that compromise their non-public information”, the director stressed.
The U.S. Attorney’s Office for the District of Massachusetts today announced criminal charges against the five defendants named in the SEC’s action and that defendant Vladislav Kliushin was extradited from Switzerland.
The commission’s complaint charges each of the defendants with violating the antifraud provisions of the federal securities 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’s investigation, which is ongoing, was conducted by Megan Bergstrom, David Bennett, and Diana Tani of the SEC’s Market Abuse Unit with assistance from Darren Boerner of the Market Abuse Unit and IT Forensics staff Ken Zavos. Joseph Sansone, Chief of the Market Abuse Unit, supervised the investigation. The Division of Economic and Risk Analysis provided substantial assistance.
David Mendel and James Connor are leading the SEC’s litigation, under the supervision of David Gottesman. The SEC appreciates the assistance of the U.S. Attorney’s Office for the District of Massachusetts, the Federal Bureau of Investigation, the Danish Financial Supervisory Authority, and the Cyprus Securities and Exchange Commission.
