NEWS ANALYSIS: A major legal takedown of insider traders shows weakness in widely used press distribution mechanisms.
When hackers look to find a target, a common objective is to find a choke point, a location where valuable information flows and can be intercepted. One such point is the major press release services, which are filled every day with large volumes of embargoed information—in other words, an attractive target for hackers.
In a pair of indictments, issued on Aug. 11 by the U.S. Department of Justice (DOJ), nine individuals were identified as participating in a massive, five-year scheme to get access to embargoed press releases that resulted in $100 million in illegal profit generation.
The indictments were unsealed in Brooklyn, N.Y., and in Newark, N.J., federal courts and alleged that the nine defendants were able to pilfer approximately 150,000 press releases from the servers of Marketwired, PR Newswire (PRN) and Business Wire. Out of those 150,000 press releases, the nine defendants were able to make use of 800 to trade stock ahead of the official release in order to generate a profit.
The District of New Jersey indictment charges five defendants: Ukranian nationals Ivan Turchynov, 27; Oleksandr Ieremenko, 24; and Pavel Dubovoy, 32; and Alpharetta, Ga., nationals Arkadiy Dubovoy, 51, and Igor Dubovoy, 28. The Eastern District of New York indictment names four defendants: Vitaly Korchevsky, 50, from Pennsylvania; Vladislav Khalupsky, 45, of Brooklyn and Odessa, Ukraine; Leonid Momotok, 47, of Suwanee, Ga.; and Alexander Garkusha, 47, of Cummings and Alpharetta, Ga.
Law enforcement officials have apprehended five of the nine: Turchynov, Ieremenko, Dubovoy and Khalupsky still remain at large.
"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," said Mary Jo White, Securities and Exchange Commission chair, in a statement
. "These hackers and traders are charged with reaping more than $100 million in illicit profits by stealing nonpublic information and trading based on that information."
All of the press release services identified by the DOJ have stated that they are cooperating with law enforcement and are working to harden security.
"Protecting the confidential information of our clients is of paramount importance," Cathy Baron Tamraz, Business Wire's CEO, said in a statement. "Despite extreme vigilance and commitment, recent events illustrate that no one is immune to the highly sophisticated illegal cyber-intrusions that are plaguing every aspect of our society."
There are multiple elements of this incident that are alarming. Every day, the inboxes of journalists across America are filled with embargoed press releases, full of potentially sensitive information. In this case, law enforcement was able to figure out that the scam targeted the press release distribution sources directly, but what is not known is whether these attackers, or others, are doing something similar with journalists.
The simple and unfortunate truth today is that most emails—which is how press releases are sent—are sent unencrypted and are largely unsecured. We don't know precisely how the attackers got into the press release services, but it's likely that it's the result of an all too common issue: lack of proper authentication and validation.
If, for example, credentials were somehow stolen from the investor relations or public relations department of an organization, perhaps that could have been one of the vectors into the press release distribution services. A more likely scenario is that attackers were able to gain access to the credentials of those who work at the press release services.
What's also alarming is that this fraud went on for five years. During that time, if there had been some form of user credential and access monitoring in place, some system should have been able to notice that something was wrong. Even without knowing the actual root cause of how the attackers got in, it's clear to me that some form of two-factor authentication and user credential monitoring might well have found this issue sooner, and could have prevented $100 million in fraud.
Sean Michael Kerner is a senior editor at
InternetNews.com. Follow him on Twitter @TechJournalist.