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US Busts Insider Trading Hackers

Posted by Soulskill on from the go-big-or-go-home dept.

An anonymous reader sends news that U.S. authorities have dispersed an insider trading ring that broke into remote servers to grab press releases before their official publishing date. The group hacked into organizations called PRNewswire, Marketwired, and Business Wire, taking as many as 150,000 press releases over the past five years, including those involving earnings reports. The information was sold to other people who used it to buy and sell stocks. The nine people targeted in this sting netted approximately $30 million, while an SEC lawsuit targeting 32 individuals says the take was more like $100 million. Their scheme is a new type of distributed insider trading that didn't rely on leaked information from employees of any of the targeted companies. "They ran this like a business. They provided customer support: The hackers allegedly set up servers for their customers to access their information, and 'created a video tutorial on how to access and use one of the servers they used to share the Stolen Releases.' They responded to customer feedback ... Their fees were performance-based, and the performance was audited."

15 of 113 comments (clear)

  1. The stock market by Anonymous Coward · · Score: 5, Insightful

    is a huge joke. Just close it down. It's very little about investment anyway. It's mostly about people having inside information grabbing cash from people who don't. And high frequency trading. The sad thing is that Economists don't seem to see this as a problem. Well, maybe this type of event on a much larger scale could actually do good by showing how bad things really are.

    1. Re:The stock market by Etherwalk · · Score: 3, Informative

      is a huge joke. Just close it down. It's very little about investment anyway. It's mostly about people having inside information grabbing cash from people who don't. And high frequency trading. The sad thing is that Economists don't seem to see this as a problem. Well, maybe this type of event on a much larger scale could actually do good by showing how bad things really are.

      Because it's better if investing your savings and diversifying is hard?

      You want a way for not-super-rich-people to buy small chunks of companies and invest. It gives them a way to get a return on their savings.

    2. Re:The stock market by Anonymous Coward · · Score: 3, Informative

      Sure, there's irresponsible trading, but I don't think you understand the purpose of the stock market.

      Ownership of a business is referred to as equity. In a sole proprietorship, one person owns all the equity. But other arrangements like partnerships and corporations are common, in which many people own equity. That may be because they've all contributed to starting the business or later invested their cast to help grow the business. Selling equity can be done privately, which doesn't require a stock market. However, the best deal for the business and investors should exist when supply and demand are allowed to determine the price of equity, which occurs when stocks are publicly traded. This does require a stock market.

      Economists do view high frequency trading and similar activities as somewhat risky. That said, the solution is to regulate how such trading occurs, not close down the entire stock market. I'm sorry, but that's a really foolish comment. And as for this article, there will always be criminals and con men. The activities described are already illegal, and it's good the scheme was shut down. However, even if you did away with the stock market, there will always be scams and ways to steal people's money. I'd say that the stock market is public and regulated enough so that sufficient numbers of people are watching and it's actually harder to steal money from investors than if trading equity was only done privately.

    3. Re:The stock market by peragrin · · Score: 4, Insightful

      high frequency trading isn't investing. in fact anything after the initial sale of the stock by the business is no longer investing in the company. it is just trading.

      After the initial IPO the only way a company directly benefits from stock is when they go to borrow money. all those regulations and headaches just means you are giving away pieces of your company to people who want to strip mine the cash reserves, liquidate the assets and move on.

      however with a good cash flow a business doesn't need that equity, and can get loans as needed. So why do they need to risk losing their business?

      --
      i thought once I was found, but it was only a dream.
    4. Re:The stock market by Errol+backfiring · · Score: 2

      I think the purpose of the stock market is much more mundane: to make money. In whatever way. That is why you can "invest" in non-existing "products", like derivatives, futures on crops that will never be planted, even ad-words, and so on. Off course, this must be regulated. The point is that it isn't. Oh, there are a few rules to pretend, but that is basically it. There is a commission to pretend to guard the rules as well, but has shown to only pretend as well (they "investigated" the flash crash only on minute basis, while microsecond precision would be necessary, and concluded that nothing was wrong. That is even more fraud than trading with prior knowledge).

      Trading with large sums of money in non-existing goods is not only risky, it is downright harmful. Money has the value of the things you can buy with it. As long as people fool themselves into believing that futures on never-to-be-planted crops are worth something, it may unexpectedly look harmless. The moment people find out, the system collapses. Along with loads of money that should have been used for real transactions between real people in the first place.

      --
      Nae king! Nae laird! Nae yurrupiean pressedent! We willna be fooled again!
    5. Re:The stock market by ScentCone · · Score: 2

      In fact this secondary purpose had created an entire industry around it whose purpose is simply to make money for themselves with no interest in the companies they are investing in.

      Except that the people who attempt to make money trading in stocks about which they are ignorant usually lose money.

      --
      Don't disappoint your bird dog. Go to the range.
    6. Re:The stock market by Imrik · · Score: 2

      A large portion of the stock market no longer pays dividends.

    7. Re:The stock market by evilRhino · · Score: 2

      Except that the people who attempt to make money trading in stocks about which they are ignorant usually lose money.

      Did you read the article? People set up an illicit education program and were arrested for their trouble. The system *requires* the investors to be ignorant.

  2. High-frequency trading=respctable insider trading by BringMyShuttle · · Score: 5, Interesting

    Hackers go to jail for insider trading because it rips off punters without access to the inside information.

    So what about High-frequency trading? Investment bankers pay a premium to the stock exchange to connect their computers closer than everyone elses. They get inside information microseconds before those same punters, and milk them for it, and it's all legit. Isn't High-frequency trading just another kind of insider trading?

    http://www.motherjones.com/pol...
    http://www.nytimes.com/2014/04...
    http://www.wsj.com/articles/re...
    http://faculty.chicagobooth.ed...

  3. Re:High-frequency trading=respctable insider tradi by Anonymous Coward · · Score: 4, Insightful

    they make billions not millions so different rules apply

  4. Corruption by Iamthecheese · · Score: 3, Informative

    Meanwhile it's completely legal for members of Congress to inside trade

    --
    If video games influenced behavior the Pac Man generation would be eating pills and running away from their problems.
  5. Re:High-frequency trading=respctable insider tradi by Anonymous Coward · · Score: 3, Insightful

    It would be illegal because it was insider trading so yeah that is a really fucking bad example of something that wouldn't be insider trading.

  6. Re:High-frequency trading=respctable insider tradi by Richard_at_work · · Score: 5, Insightful

    Reacting quicker to publicly released information is not illegal, no matter how much you personally hate high frequency trading - just because you ensure you have an advantage in the speed of reaction over other people doesn't make it insider trading. Lets say that HFT is banned, reacting to releases before other traders can still net you a huge advantage, even if you are only allowed one trade a second or minute. Its that first trade (either sale or purchase) at current market prices which can make your profit.

    So HFT is banned, releases are via email or direct notification and all trades have to be manually entered - how quickly does the press release reach your inbox, how quickly can you type, what if your email or notification server is backlogged, how quickly can someone scan a release for the relevant details (should I buy or sell?), and how quickly can you enter those details into the system.

    There are always ways to shave time off of reactions, no matter what approach you take.

  7. Re:High-frequency trading=respctable insider tradi by ScentCone · · Score: 2

    Isn't High-frequency trading just another kind of insider trading?

    No. That's like saying that you should be penalized because you're smarter and can think more quickly than the guy next to you. You both can make the same arrangements to (for example) become aware of a new request for bids on some project ... but because you position yourself to be able to put every available second before the due date to put together a more attractive offer, and figure out how to respond persuasively in a way that's more profitable for you than it is for the slower, dumber guy standing next to you, you'll be ahead of the game. It's not FAIR that people who take the time and invest the resources to more quickly respond to opportunities end up having more opportunities. Not FAIR! Waah!

    Except, it IS fair. Because they're responding to published information, not to insider information that isn't supposed to be disclosed (yet).

    --
    Don't disappoint your bird dog. Go to the range.
  8. Re:High-frequency trading=respctable insider tradi by Antique+Geekmeister · · Score: 4, Insightful

    But the high frequency trading purchases and sales are, effectively, technologically assisted "pump and dump". They don't hold most stocks for even 60 seconds, and rely on the "forgiveness" of the puchasing system to discard trades they don't ever actually complete, to avoid transaction fees and to discard trades which might lose them money. The positive feedback of one HFT making a few puchases bumps a price incrementally, the next HFT buys some on speculation, the first sells and buys more, and they heterodyne off each other and the other shortsellers until the stock price hits a cap imposed by the other, slower, negative feedback in the market. Then they both shortsell on the way down, draining the potential profits from other, longer term investors on the way up and the way down.

    HFT makes its money, not off of investment, but off of pure "arbitrage", off the churn in the market. It's quite destructive and drains the profit right out of normal buying and selling.