Georgia Broker in Corporate Wire Hacking to Plead GuiltyBy
Insider ring hacked into press releases and earned millions
Five-year scheme was largest of its kind ever charged by U.S.
A Georgia broker will plead guilty in a probe an insider-trading ring that employed hackers to pilfer corporate press releases before they were published to reap millions of dollars in illicit profits, according to court records.
Loenid Momotok, of Suwanee, Georgia, allegedly maintained and controlled a brokerage account used in a five-year long scheme, prosecutors said. He is scheduled to enter his plea before a federal magistrate Ramon Reyes in Brooklyn, New York.
Momotok was one of nine people charged in what federal prosecutors in Brooklyn and New Jersey said last year was the largest scheme of its kind ever prosecuted in both the scope of the alleged hacking as well as the number of traders involved. The cases also highlight the cutting edge where securities fraud and hacking intersect.
Momotok was part of a criminal alliance of traders and hackers who infiltrated the systems of PR Newswire Association LLC, Marketwired Inc. and Business Wire, obtaining more than 150,000 unpublished news releases ahead of market-moving news, according to prosecutors. Traders made about $30 million in illicit gains, while the U.S. Securities and Exchange Commission said in a related complaint that they made $100 million.
The ring gained access to the three services by launching a series of orchestrated cyber-attacks using malware and by obtaining the log-in credentials of news wire employees, according to the U.S. Once the releases were obtained, hackers then shared the information with traders, including circulating "shopping lists" of companies about to issue news releases, such as Panera Bread Co, Caterpillar Inc., Home Depot Inc. and Advanced Microdevices Inc., the U.S. said.
Members of the ring in both the U.S. and the Ukraine, including Momotok, then traded on the leaked news releases ahead of their publication, prosecutors said. Millions of dollars in illicit profits earned in the scheme were then laundered when they were transferred to Europe, Asia and elsewhere using shell companies, according to the U.S.
Momotok’s attorney, Linda Moreno, didn’t return a voice-mail message left at her office seeking comment about the case.
Momotok’s co-defendant, Vitaly Korchevsky, called the alleged "linchpin" of the scheme by prosecutors, is accused of making $17 million in the scheme, according to the U.S. He’s pleaded not guilty to the charges. Another co-defendant, Alexander Garkusha, pleaded guilty in December and is cooperating with the U.S. He hasn’t been sentenced. A fourth man isn’t in custody.
Of the five people charged by federal prosecutors in New Jersey, two have pleaded guilty and charges are pending against the other three, court records show.
Momotok was indicted on conspiracy, securities fraud, money laundering and other charges. The most serious crimes of securities fraud and wire fraud carry terms of as long as 20 years in prison.
The cases are U.S. v. Turchynov, 15-cr-00390, U.S. District Court, District of New Jersey (Newark), and U.S. v. Korchevsky, 15-cr-00381, U.S. District Court, Eastern District of New York (Brooklyn).