The trial of two men who allegedly made $20 million in an insider trading scheme involving hackers who stole corporate press releases before they were public began in Brooklyn on Tuesday, Reuters reported, with prosecutors telling jurors they had “electronic communications, trading records and testimony from witnesses who took part in the scheme themselves.”
According to Reuters, the case was first unsealed in 2015 after arrests began, with prosecutors seeking to prove charges including securities fraud and conspiracy against former Morgan Stanley executive-turned-pastor Vitaly Korchevsky and another man named Vladislav Khalupsky:
Korchevsky, a Pennsylvania pastor and former Morgan Stanley vice president, and Khalupsky got information stolen by Ukraine-based hackers from financial newswires through an international network of conspirators, Gopstein said. He said their scheme continued for years.
Korchevsky was arrested at his home in 2015, Gopstein said. Khalupsky was arrested in Ukraine and extradited.
Witnesses include Arkadiy Dubovoy and his son Igor Dubovoy, who pleaded guilty to “related charges” and have flipped for the prosecution, Reuters added. Both Korchevsky and Khalupsky are seeking to portray themselves as innocent victims of their former partners who knew nothing about the hacking. However, according to Bloomberg, Korchevsky owns Pennsylvania and Georgia real estate worth about $5 million and was in possession of $5 million “in bank and brokerage accounts that the government froze on the day of his arrest.”
According to a Department of Justice press release from 2015, nine individuals in two states were originally charged in the scheme, which prosecutors alleged involved the hacking of at least 150,000 press releases from newswire companies and generated $30 million in profit. Court documents from 2016 that ended up on Naked Security alleged the hackers used a variety of techniques including social engineering, malicious software, and SQL injection attacks to obtain documents they then sold to stock traders:
The traders created “shopping lists” or “wish lists” for the hackers listing desired upcoming press releases for publicly traded companies… [T]heir trading activities shadowed the hackers’ capabilities to exfiltrate stolen press releases… trading data often showed a flurry of trading activity around a stolen press release just prior to its public release.
Reuters added that the case is the “first time criminal charges have been brought for a securities fraud scheme involving hacked inside information.”