A Georgia broker has admitted in court that he joined an insider-trading ring that reaped millions of dollars in illicit profits from Ukrainian hackers who pilfered corporate news releases before they were published.
Insider Trading
Leonid Momotok is alleged to have profited from trades based on information that he knew was stolen. He claims that he was invited to join the group by Arkadiy Dubovoy, a friend who informed him that he was getting unpublished press releases from hackers.
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Momotok said he then joined another acquaintance, Vladislav Khalupsky, helping him analyse and place trades based on the unpublished press releases.
Members of the ring in the U.S. and the Ukraine, including Momotok, "traded on the leaked news releases ahead of their publication", according to prosecutors with millions of dollars having been laundered when they were transferred to Europe, Asia and elsewhere using shell companies.
Momotok’s co-defendant, Vitaly Korchevsky, referred to as the “linchpin” by prosecutors, is accused of making $17 million. He has pleaded not guilty to the charges and is awaiting trial. A further co-defendant, Alexander Garkusha, pleaded guilty in December and is awaiting sentence.
SEC Charges
The U.S. Securities and Exchange Commission (SEC) has separately charged over 40 people and entities for their roles in the scheme which resulted in more than $100 million of illegal profit from 2010 to 2015.
Authorities said that traders, including many with ties to Russia, gave hackers shopping lists of releases they wanted to see in advance, including quarterly results of public companies.
Of the five charged by federal prosecutors, two have now pleaded guilty and charges are pending against the other three. In May, a tenth person, Vadym Iermolovych, pleaded guilty to helping two other hackers steal thousands of news releases. Iermolovych has been charged separately.
