Edwards Targeted in $3.6M Ukrainian Hacking Scheme

Investors who allegedly stole earnings press releases before they became public made a whopping $3.6 million in profits by short-selling stock in Edwards Lifesciences, according to the Securities and Exchange Commission.

Nancy Crotti

Heart-valve specialist Edwards Lifesciences (Irvine, CA) was among "numerous" companies whose press releases announcing earnings the investors allegedly hacked from news services including Business Wire, MarketWired, and PR Newswire, according to SEC fraud charges unsealed this week.

Filed in U.S. District Court in New Jersey, the charges claim that the alleged hackers purloined more than 150,000 earnings press releases from newswire services used by the publicly traded companies. The SEC listed Edwards as an example.

Here's how the agency says it went down:

Edwards "learned about the news as it was disclosed on Tuesday morning, and are unable to comment until we know more," a company spokesperson wrote in an email to Qmed.

Those charged include two Ukrainian men who allegedly hacked into newswire services to obtain the information, and 30 others in and outside the United States who reportedly traded on it, generating more than $100 million in illegal profits overall, the agency said in a statement.

The FBI also rested, Vitaly Korchevsky, the pastor of Slavic Evangelical Baptist Church in Brookhaven, PA, for his alleged involvement in the scheme. The 50-year-old preacher also has worked as a money manager and financial adviser. He has been released on $100,000 bail.

In all, nine men based in the Ukraine and the United States were indicted for their alleged involvement in the scheme.

Other well-known companies whose earnings statements were allegedly stolen over the five-year period include Align Technologies (San Jose, CA), maker of Invisalign orthodontic devices (which resulted in a $1.4 million windfall for the hackers); Radio Shack; Panera Bread; and Zumiez, a skateboarder clothing store chain. In one instance, the defendants had a window of only 36 minutes to act, the agency's statement said.

According to the SEC complaint, Ivan Turchynov and Oleksandr Ieremenko hid the intrusions by using proxy servers to mask their identities and by posing as newswire service employees and customers. The two allegedly recruited traders with a video showcasing their ability to steal the earnings information before its public release.

The complaint charges that in return for the information, the traders sometimes paid the hackers a share of their profits, even going so far as to give the hackers access to their brokerage accounts to monitor the trading and ensure that they received the appropriate percentage of the profits. The SEC alleges that the traders tried to hide their tracks by creating multiple accounts, funneling money to the hackers as supposed payments for construction and building equipment, and trading in CFDs.

"This cyber hacking scheme is one of the most intricate and sophisticated trading rings that we have ever seen, spanning the globe and involving dozens of individuals and entities," said Andrew Ceresney, director of the SEC's enforcement division, in the statement.