The United States Securities and Exchange Commission (SEC) this week dismissed claims it had filed against Maltese financial services company Exante in one of the biggest financial hacking cases in history, but charged nine of its brokerage customers for allegedly illegal trading through a brokerage account held in Exante’s name.
Last August the SEC alleged that Maltese company Exante Ltd was one of the major players in an international cyber-fraud securities trading ring in which hackers gave the company confidential earnings information for numerous publicly-traded companies, before the information was released to the public, from press releases it had stolen from at least two newswire services.
The ring then allegedly used that stolen information to trade securities and reaped over US$100 million in unlawful profits. Out of that US$100 million, Exante Ltd, whose offices are located at the Portomaso Tower, was alleged to have raked in US$24.5 million in “ill-gotten gains” – accounting for close to a quarter of the entire worth of the scam, which American investigators are calling the biggest case of its kind ever prosecuted, claims that the company had vociferously denied at the time.
The SEC alleges that the hackers transmitted the stolen data to multiple groups of traders in Russia, Ukraine, Malta, Cyprus, France, and three US states – Georgia, New York, and Pennsylvania.
The nine defendants charged include five Russian nationals and four entities they controlled that engaged in the illegal trading. In the SEC’s action filed, it alleges that Evgenii Zavodchiko, Extra Trading Company, Andrey Bokarev, Radion Panko, Green Road Corp., Natalia Andreevna Alepko, Solar Line Inc., Anton Maslov, and Tarek Investors Inc. used this same non-public information to place illicit trades in stocks and options, reaping over $19.5 million in illicit profits.
US authorities said that beginning in 2010 and continuing as recently as May, they gained access to more than 100,000 press releases that were about to be issued by Marketwired; PR Newswire in New York; and Business Wire of San Francisco. The press releases contained earnings figures and other corporate information.
The defendants then used roughly 800 of those news releases to make trades before the information came out, exploiting a time gap ranging from hours to three days, prosecutors said in their court filings.
Exante denied allegations from day one
On its part, Exante had denied the allegations from day one saying, “The complaint completely misrepresents Exante, our business model, and the regulatory conditions we operate in. Exante has worked hard to build a strong brand respected by its peers that serves as a one-stop shop for all markets and instruments. The company was built for traders by traders and any illicit trading will not be tolerated.
“Contrary to claims in the complaint as well as in the media, Exante has never been and is not a hedge fund. Our business model is to execute trades for our clients.”
Exante said it has strong and effective internal and external market surveillance and monitoring. The company explained that it is in “direct contact with multiple authorities, including the MFSA, to resolve this issue swiftly. We have no doubt in time we will be proved to have acted in an appropriate manner and await the factual results.
“Our employees will continue to work hard to ensure Exante clients continue to receive outstanding service while gaining peace of mind and security.”