A Georgia broker admitted that he joined an insider-trading ring that reaped millions of dollars in illicit profits from Ukrainian hackers who pilfered corporate press releases before they were published.
Leonid Momotok, of Suwanee, Georgia, said Tuesday that he profited from trades based on information that he knew was stolen.
"It was bad judgment and I am very sorry," he told U.S. Magistrate Judge Ramon Reyes in Brooklyn, New York.
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Momotok, 48, was one of nine people charged in Brooklyn and New Jersey in a case the government described last year as the largest scheme of its kind ever prosecuted, in both the scope of the hacking and the number of traders involved.
Plea Deal
Momotok said he was invited to join the group by Arkadiy Dubovoy, a friend who told him he was getting unpublished press releases from hackers. Dubovoy was charged separately by federal prosecutors in New Jersey and is awaiting trial. Momotok said he then joined another acquaintance, Vladislav Khalupsky, helping him analyze and place trades based on the unpublished press releases. Khalupsky, who was also charged by the U.S., isn't in custody.
As part of a plea deal, Momotok pleaded guilty to one count of conspiracy to commit wire fraud and agreed not to challenge a prison term of not more than nine years when he is sentenced Dec. 9. He and his attorney, Linda Moreno, declined to comment as they left court.
The case highlights an unusual intersection of securities fraud and hacking. Prosecutors said the ring employed a criminal alliance of traders and hackers who infiltrated PR Newswire Association LLC, Marketwired Inc. and Business Wire, obtaining more than 150,000 unpublished news releases ahead of market-moving news. Traders made about $30 million in illicit gains.
The ring gained access to the three services by launching a series of orchestrated cyber-attacks using malware and obtaining the log-in credentials of newswire employees, according to the government. Hackers then circulated "shopping lists" of companies about to issue news releases, such as Panera Bread Co., Caterpillar Inc., Home Depot Inc. and Advanced Micro Devices Inc., the government said.
Leaked Releases
Members of the ring in the U.S. and the Ukraine, including Momotok, traded on the leaked news releases ahead of their publication, prosecutors said. Millions of dollars were laundered when they were transferred to Europe, Asia and elsewhere using shell companies, according to the government.
Momotok's co-defendant, Vitaly Korchevsky, called the alleged "linchpin" by prosecutors, is accused of making $17 million. He pleaded not guilty to the charges and is awaiting trial. Another co-defendant, Alexander Garkusha, pleaded guilty in December and is cooperating with the U.S. He hasn't yet been sentenced.
Of the five charged by federal prosecutors in New Jersey, two have pleaded guilty and charges are pending against the other three, according to court records. In May, a tenth person, Vadym Iermolovych, 28, of Ukraine, pleaded guilty in federal court in Newark, to helping two other hackers steal thousands of news releases. Iermolovych was charged separately by the U.S.
The cases are U.S. v. Turchynov, 15-cr-00390, U.S. District Court, District of New Jersey (Newark), and U.S. v. Korchevsky, 15-cr-00381, U.S. District Court, Eastern District of New York (Brooklyn).
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