Lohmus Haavel & Viisemann, et al.
U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19450 / November 1, 2005
Securities and Exchange Commission v. Lohmus Haavel & Viisemann, et al., Civil Action No. 05-9259 (S.D.N.Y.)
SEC FILES EMERGENCY ACTION AGAINST ESTONIAN TRADERS TO STOP ONGOING FRAUDULENT HACKING SCHEME
Foreign Traders Used Computerized "Spider" Program to Fraudulently Steal Nonpublic Issuer Press Release Information from Commercial Wire Service
The Securities and Exchange Commission ("Commission") announced that, in an emergency federal court action filed today, it charged Lohmus Haavel & Viisemann ("Lohmus"), an Estonian financial services firm, and two of its employees, Oliver Peek and Kristjan Lepik, with conducting a fraudulent scheme involving the electronic theft and trading in advance of more than 360 confidential press releases issued by more than 200 U.S. public companies. The Commission alleges that the defendants fraudulently stole the confidential information from the website of Business Wire, a leading commercial disseminator of news releases and regulatory filings for companies and groups throughout the world, and since January 2005 have made at least $7.8 million in illegal profits.
Acting on the Commission's request for emergency relief, the United States District Court for the Southern District of New York today issued a temporary restraining order which, among other things, freezes the defendants' assets and orders the repatriation of funds taken out of the United States.
The Commission's complaint alleges that, in June 2004, Lohmus became a client of Business Wire for the sole purpose of gaining access to Business Wire's secure client website. Once defendants had access, they surreptitiously utilized a software program, a so-called "spider" program, which provided unauthorized access to confidential information contained in impending nonpublic press releases of other Business Wire clients, including the expected time of issuance.
The complaint further alleges that the information fraudulently stolen by the defendants has allowed them to strategically time their trades around the public release of news involving, among other things, mergers, earnings, and regulatory actions. Using several U.S. brokerage accounts, the defendants have bought long or sold short the stocks of the companies whose confidential press release information they have stolen, and purchased options to increase their profits.
Named in the Commission's complaint are the following defendants:
Lohmus Haavel & Viisemann, headquartered in Tallinn, Estonia, is an investment bank established in 1999. Lohmus, which also has offices in Latvia and Lithuania, provides corporate financing, private equity, asset management, investment services, and structured financing services to the Eastern European market.
Oliver Peek, age 24, is a citizen of Estonia currently residing in Tallinn. Peek is employed by Lohmus and works for its investment services team.
Kristjan Lepik, age 28, is a citizen of Estonia currently residing in Tallinn. Lepik is a partner at Lohmus.
As a result of the defendants' conduct, the Commission alleges that the defendants violated Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. The complaint seeks permanent injunctive relief, the disgorgement of all illegal profits, together with prejudgment interest, and the imposition of civil monetary penalties.
The Commission wishes to acknowledge the assistance of the New York Stock Exchange, the NASD, the Philadelphia Stock Exchange, the Chicago Board Options Exchange, and the Pacific Exchange.
