Zavodchiko, et al.
U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 23471 / February 18, 2016
Securities and Exchange Commission v. Zavodchiko, et al., Civil Action No. 2:16-cv-00845-MCA-LDW (D.N.J., filed February 17, 2016)
SEC Charges Nine Additional Defendants in Hacked News Release Scheme
The Securities and Exchange Commission yesterday filed fraud charges against nine defendants for taking part in an international scheme to execute profitable securities trades based on nonpublic information that computer hackers stole from at least two newswire services. In August 2015, the SEC charged 34 defendants in connection with this same scheme. The SEC alleges that hackers hacked into newswire services to obtain the highly-valuable corporate information and then passed it to others who used the information to execute trades and generated more than $100 million in illegal profits. The nine defendants charged include five Russian nationals and four entities they controlled that engaged in the illegal trading.
The SEC's complaint was filed in U.S. District Court in Newark, N.J., and the court entered an asset freeze and other preliminary relief against the nine new defendants.
As outlined in the SEC's initial complaint filed in August 2015 and in yesterday's complaint, the SEC alleges that, over a five-year period, Ivan Turchynov and Oleksandr Ieremenko hacked into multiple newswire services and stole hundreds of corporate earnings announcements before the newswires released them to the public. The SEC alleges that the hackers transmitted the stolen data to multiple groups of traders in Russia, Ukraine, Malta, Cyprus, France, and three U.S. states, Georgia, New York, and Pennsylvania. In the SEC's action filed yesterday, the SEC alleges that Evgenii Zavodchiko, Extra Trading Company, Andrey Bokarev, Radion Panko, Green Road Corp., Natalia Andreevna Alepko, Solar Line Inc., Anton Maslov, and Tarek Investors Inc. used this same nonpublic information to place illicit trades in stocks and options, reaping over $19.5 million in illicit profits.
The nine defendants charged were brokerage customers of Malta-based Exante Ltd., and engaged in their allegedly illegal trading through a brokerage account held in Exante's name. At the same time that it filed these new charges, the SEC dismissed claims previously filed against Exante based on the same trades.
The SEC has entered into settlements with three defendants charged in the August 2015 action, see Litigation Release Nos. 23345 and 23458, and two defendants, Igor Dubovoy and Aleksandr Garkusha, have pled guilty in parallel criminal actions filed by the U.S. Attorney's Offices for the District of New Jersey and the Eastern District of New York.
The SEC's new complaint charges each of the nine defendants with violating Sections 10(b) and 20(b) of the Securities Exchange Act of 1934 and Rule 10b-5 as well as Section 17(a) of the Securities Act of 1933. The complaint seeks a final judgment ordering the defendants to pay penalties, return their allegedly ill-gotten gains with prejudgment interest, and be subject to permanent injunctions from future violations of the antifraud laws.
The Commission's litigation continues against the remaining defendants charged in the case. For more information, see Litigation Release No. 23319 (August 13, 2015).
