Hackers Traded on Press Releases Stolen from Major Newswire
Companies
Vitaly Korchevsky, a former hedge fund manager, was
sentenced in federal court in Brooklyn today by United States District Judge
Raymond J. Dearie to 60 months’ imprisonment for conspiracy to commit wire
fraud, conspiracy to commit securities fraud and computer intrusion, conspiracy
to commit money laundering and two counts of securities fraud. The Court also ordered Korchevsky to pay $14.4
million in forfeiture and a $250,000 fine.
Co-defendant Vladislay Khalupsky, a securities trader, was convicted of
the same charges, and was sentenced on January 11, 2019 to 48 months’
imprisonment.
Following a four-week jury trial, Korchevsky and Khalupsky
were convicted in July 2018 for their roles in an international scheme to hack
into three newswire services and steal press releases containing non-public
financial information prior to their publication. The defendants and their co-conspirators then
used this information to make trades generating approximately $30 million in
illegal profits
Richard P. Donoghue, United States Attorney for the Eastern
District of New York, William F. Sweeney, Jr., Assistant Director-in-Charge,
Federal Bureau of Investigation, New York Field Office (FBI), and David E.
Beach, Special Agent-in-Charge, United States Secret Service, New York Field
Office (USSS), announced the sentences.
“Korchevsky and Khalupsky will now pay the price for using
their experience as traders to generate millions of dollars in unlawful trades
based on hacked information,” stated United States Attorney Donoghue. “Today’s sentence sends a powerful message
that, no matter how sophisticated or novel the scheme, cybercriminals and
traders who steal information from U.S. companies and undermine the integrity
of our financial markets will be held accountable for their actions.” Mr. Donoghue expressed his grateful appreciation
to the United States Attorney’s Office for the District of New Jersey
(USAO-DNJ), the Department of Homeland Security (DHS) and the U.S. Securities
and Exchange Commission (SEC) for their significant cooperation and assistance
in this case.
“The Secret Service
remains committed to aggressively investigating and pursuing those responsible
for cyber-enabled financial crimes,” stated USSS Special Agent-in-Charge
Beach. “The sentence today is testament
to the Secret Service’s commitment to building strong partnerships between
local, state and federal law enforcement and represents a win against those who
chose to threaten the financial infrastructure of the United States.”
Between February 2010 and August 2015, computer hackers
based in the Ukraine gained unauthorized access into the computer networks of
Marketwired L.P., PR Newswire Association LLC and Business Wire, through a
series of sophisticated cyberattacks.
The hackers moved through the computer networks and stole press releases
about upcoming announcements by public companies concerning earnings, revenues
and other material non-public information.
In order to monetize that information, the hackers shared
the stolen press releases with a network of traders, including Korchevsky and
Khalupsky, through overseas computer servers controlled by the hackers, and/or
through secure email accounts.
Korchevsky and Khalupsky then generally traded ahead of the public
distribution of the stolen releases, executing trades in extremely short
windows of time, usually shortly after the close of the markets. As a result, the trading data often showed a
flurry of trading activity around a stolen press release just prior to its
public release. Korchevsky, Khalupsky
and their co-conspirators traded on stolen press releases concerning hundreds
of publicly traded companies.
The illegal trading by the criminal network resulted in
gains of more than $30 million, much of which was routed back to the
hackers. Korchevsky traded on the stolen
press releases both in brokerage accounts that benefitted the criminal network,
as well as in his personal brokerage accounts, and ultimately netted
approximately $15 million in profits over the course of the scheme. Khalupsky primarily traded in accounts that
benefited the criminal network, and received a percentage of the multi-million
dollars in profits he generated by trading on the stolen press releases. He directed that payments received for the
illegal profits he generated for the criminal network be made to offshore shell
companies.
The charges against Korchevsky and Khalupsky were set forth
in an indictment unsealed in August 2015 in connection with a broader
investigation conducted by this Office, the USAO-DNJ, the FBI, the USSS and the
DHS, as well as a parallel investigation by the SEC. In total, nine defendants were charged
criminally for their roles in the scheme.
All have either pleaded guilty or been convicted at trial, except for three
defendants who remain at large.
The government’s case is being handled by the Office’s
Business and Securities Fraud Section and National Security and Cybercrime
Section. Assistant United States
Attorneys Richard M. Tucker, Julia Nestor and David Gopstein are in charge of
the prosecution. Assistant United States
Attorney Tanisha Payne is in charge of forfeiture aspect of the case.
The Defendants:
VITALY KORCHEVSKY
Age: 53
Glen Mills, Pennsylvania
VLADISLAV KHALUPSKY
Age: 48
Brooklyn, New York and Odessa, Ukraine
E.D.N.Y. Docket No. 15 CR 381 (RJD)
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