Yesterday, the SEC dropped a complaint against a hacking ring that was targeting EDGAR, the financial filing system run by the US Government to make illicit profits. The individuals named in the complaint included:

OLEKSANDR IEREMENKO, SPIRIT TRADE, LTD., SUNGJIN CHO, DAVID KWON, IGOR SABODAKHA, VICTORIA VOROCHEK, IVAN OLEFIR, CAPYIELD SYSTEMS, LTD., and ANDREY SARAFANOV, Defendants, and KYUNGJA CHO, LYUDMILA KALINKINA, ANDREY MELEYNIKOV, and IVAN SOLOVEV , Relief Defendants.

View the full complaint here.

Complaint Summary Follows:

Case 2:19-cv-00505 Document 1 Filed 01/15/19

Cheryl L. Crumpton Stephan J. Schlegelmilch U.S. SECURITIES AND EXCHANGE COMMISSION 100 F Street, N.E. Washington, DC 20549 Attorneys for Plaintiff

UNITED STATES DISTRICT COURT DISTRICT OF NEW JERSEY U.S. SECURITIES AND EXCHANGE COMMISSION, Plaintiff,

v.

OLEKSANDR IEREMENKO, SPIRIT TRADE, LTD., SUNGJIN CHO, DAVID KWON, IGOR SABODAKHA, VICTORIA VOROCHEK, IVAN OLEFIR, CAPYIELD SYSTEMS, LTD., and ANDREY SARAFANOV, Defendants,

and KYUNGJA CHO, LYUDMILA KALINKINA, ANDREY MELEYNIKOV, and IVAN SOLOVEV Relief Defendants.

Civil Action No. 19-cv-505 Jury Trial Demanded COMPLAINT Plaintiff United States Securities and Exchange Commission (the “SEC”), 100 F Street, N.E., Washington, DC 20549, alleges as follows against the following Defendants and Relief Defendants, whose names and last known addresses are set forth below:

a. Oleksandr Ieremenko – Kiev, Ukraine

b. Spirit Trade, Ltd., Wellborne Comm CTR 8, Hong Kong, RM 709, Hong Kong Special Administrative Region of China;

c. Sungjin Cho – 681 S. Norton Avenue, Apt. 116, Los Angeles, CA 90005;

d. David Kwon – 3223 W. 6th Street, Unit 406, Los Angeles, CA 90020;

e. Igor Sabodakha – PR. Geroev Stalingrada 12D, app. 81, Kiev, 04210, Ukraine;

f. Victoria Vorochek – ul. Vilesova 6B, app. 57, Severodonetsk, Luhans’ka Oblast, 93400, Ukraine;

g. Ivan Olefir – Staritskogo 16, Chaika, Kiev Oblast, 08130, Ukraine;

h. Capyield Systems, Ltd. – #1 Mapp Street, Belize City, Belize;

i. Andrey Sarafanov – Nogina, 2-15, Dedovsk, Moskva, 143530, Russian Federation;

j. Kyungja Cho – 56 Neungpyeong-ro 156beon-gil, Opo-eup, Gwangju-si Gyeonggi-do, 12773, Republic of Korea;

k. Lyudmila Kalinkina – Poliny Osipenko 14/1 – 98, Moscow, 123007, Russian Federation;

l. Andrey Meleynikov – The Taras Shevchenko embankment 1/2, 190, Moscow, 121248, Russian Federation; and m. Ivan Solovev – ul. Sklizkova d 116 korp 1, kv 106, Tver’, 170028, Russian Federation.

SUMMARY

1. This action arises from a fraudulent scheme to hack into the SEC’s online Electronic Data Gathering, Analysis, and Retrieval (“EDGAR”) system to obtain nonpublic documents containing earnings announcements of publicly-traded companies, and to then use that information to profit by trading in advance of the information becoming public. The scheme was the second part of a long-term effort, the first phase of which targeted at least three newswire services.
2. Starting in at least May 2016 and continuing into at least October 2016, Defendant Ieremenko and others working with him used a variety of deceptive means to obtain thousands of nonpublic “test filings” from the SEC’s EDGAR system’s servers. In some instances, these test filings included submissions by public companies that contained earnings results and other material information that the companies had not yet released to the public. The hacked material nonpublic information was then transmitted to traders who, in connection with approximately 157 earnings announcements, used it to place profitable securities trades before the information was made public.
3. Defendants Spirit Trade, Ltd., Sungjin Cho, Kwon, Capyield Systems, Ltd., Olefir, Sabodakha, Vorochek, and Sarafanov (collectively, the “Trader Defendants”) served as part of a network of securities traders located in the United States, Ukraine, and Russia, who received the hacked material nonpublic information, directly or indirectly, from Ieremenko. The Trader Defendants then monetized the information by purchasing or selling short the relevant securities and profiting from the market reaction once the information was disseminated to the public. The Trader Defendants then, directly or indirectly, kicked back a portion of the resulting trading profits to Ieremenko.
4. Defendants’ scheme reaped over $4.1 million in gross ill-gotten gains from trading based on nonpublic EDGAR filings.
5. These illicit gains are in addition to gains generated during an earlier phase of the scheme in which Ieremenko and others hacked material nonpublic information from at least three newswire services. Most of the Trader Defendants previously traded nonpublic information hacked from newswire services during the previous phase of the scheme, including Sungjin Cho, Capyield, Olefir, Vorochek, Sabodakha, and Sarafanov. An individual with control over Spirit Trade also previously traded on information hacked from newswire services.
6. By engaging in the conduct described herein with the requisite scienter, Defendants violated, and unless enjoined, will continue to violate the securities laws.