The insider trading case brought against the Ukrainian investment banking firm Jaspen Capital Partners and its chief executive as part of the SEC’s recent freeze on accounts trading early on information from hacked press releases has resolved with an agreement to pay the Securities and Exchange Commission $30 million.
The allegations in these cases involve the identification of companies expected to make newsworthy announcements, the hacking of three different press release sites to obtain the news early, and the passing of information to various traders to buy or sell stocks on the basis of the nonpublic information.
Insider trading is prosecuted under the anti-fraud section 10(b) of the Securities Act and Rule 10b-5. Although insider trading typically involves a corporate insider with nonpublic information, it can also apply to outsiders who acquire material, non-public company information under the misappropriation theory popularized by U.S. v. O’Hagan, 521 U.S. 642 (1997).
This is one of the first, if not the first, settlement of a securities case involving hacking. We expect more cases of this type in the future involving both insider trading and improper disclosures by public companies. In this case, the SEC is continuing to pursue the other defendants in the ring.