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NEW YORK (CNN/Money) -
The Securities and Exchange Commission charged an Estonian financial services firm and two of its employees with stealing confidential information from Business Wire and walking away with at least $7.8 million in illegal profits.
The complaint alleges that the defendants stole confidential information from the Business Wire Web site, a disseminator of news releases and regulatory filings for companies and groups, and traded in advance of more than 360 confidential press releases issued by more than 200 U.S. public companies.
The defendants named in the complaint are Oliver Peek, Kristjan Lepik, and the investment bank Lohmus Haavel & Viisemann. Peek is employed by Lohmus and works for its investment services team, Lepik is a partner at the firm.
According to the complaint, Lohmus became a client of Business Wire to gain access to Business Wire's secure client site.
Once the defendants had access, they used a "spider" software program, which provided unauthorized access to confidential information of other Business Wire clients contained in press releases which had yet to be made available to the general public.
"No one," Business Wire Chairman and CEO Lorry Lokey said in a statement, "gained access to our news release file prior to distribution to the media and investment community. Some of the SEC statements in its complaint have been misinterpreted."
Certain individuals gained access to a screen shot of limited background information, the company acknowledged but this information did not include the content of news releases.
According to the SEC, the defendants used several U.S. brokerage accounts to buy long or sell short the stocks of the companies whose confidential press release information they stole, and also to purchase options to increase their profits before the information had been disseminated by Business Wire.
"Our action today demonstrates that we will seek out and stop securities fraud wherever we find it. Whether in an old-fashioned boiler room or, as in this case, in the high-tech environs of the Internet, such conduct will be met with a swift and vigorous enforcement response," Linda Chatman Thomsen, Director of the SEC's Division of Enforcement, said in a statement.
"We acted today to stop a clever and pernicious securities fraud and to preserve funds for investors. This case highlights that even when fraudsters invent new ways to violate the securities laws, the Commission will track them down and stop them, wherever they are located," Daniel M. Hawke, Associate District Administrator of the Commission's Philadelphia District Office, said in the statement.
The defendants violated Section 10(b) of the Exchange Act, the SEC said. The U.S. District Court for the Southern District of New York issued a temporary restraining order to freeze the defendants' assets.
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