Estonian Traders Accused of Hacking Business Wire

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The Securities and Exchange Commission is accusing two Estonian traders of breaking into the computer systems of Business Wire, a leading distributor of corporate press releases. They are accused of using the information to make profitable trades.

STEVE INSKEEP, host:

The Securities and Exchange Commission is calling this one of the most ingenious scams they've seen in a while. Two people cracked into a major business news Web service. They were from Estonia. They were able to see news before the markets did and they traded on that information. By last count, they made more than $7 million. The scam was stopped this week, but the implications will affect traders in the US and many people in Estonia. NPR's Adam Davidson reports.

ADAM DAVIDSON reporting:

So far only two men have been accused in the scam, Oliver Peek, who is 24 years old, and Kristjan Lepik, 28. Here's the SEC's allegations. Peek and Lepik cracked into the computer servers of Business Wire, a leading distributor of corporate press releases. They saw company news before it was made public and then made large trades. Daniel Hawke is a lawyer with the SEC.

Mr. DANIEL HAWKE (Attorney): It's certainly a clever scheme. It's illegal. And we took action to stop it.

DAVIDSON: The SEC alleges the Estonians became customers of Business Wire in order to access its computers. They then used a computer program called a spider, which gets inside a server and constantly sends back information. In this case, it sent the titles of soon-to-be-published company press releases. Business Wire officials say Peek and Lepik only got to see the titles, not the release documents themselves. But some of those titles allowed the Estonians to foresee upcoming mergers, acquisitions and earnings reports, the kind of news that can move a stock's price.

Mr. HAWKE: It's important that people understand that computers in the United States are vulnerable to attack by people overseas.

DAVIDSON: Business Wire moved quickly to limit damage from the event. Its chairman, Lorry Lokey, says he knew what to do right away.

Mr. LORRY LOKEY (Chairman, Business Wire): When you have a crisis, you open up immediately and tell all you know. You don't try to duck and bob and weave. Full information removes doubt and removes suspicion and creates authenticity and credibility.

DAVIDSON: Lokey says Business Wire has worked closely with the SEC's investigation and he says has now fixed the problem that created the security breach. The event could be far more damaging to the small country of Estonia. Kurta Ruse(ph), Washington bureau chief for the Estonian Business Daily, says Peek and Lepik were not just bedroom computer hackers. They worked for Estonia's leading financial institution, Lohmus Haavel & Viisemann.

Ms. KURTA RUSE (Estonian Business Daily): This is a very, very respectable company. It's a major investment bank in the border countries.

DAVIDSON: Ruse says this scam is front-page news in Estonia. One of the defendants, Kristjan Lepik, is quite famous. He's often on TV and is celebrated as a model of Estonia's successful transition to capitalism.

Ms. RUSE: He has been known by some circles as like a young icon of the country. He's successful and good-looking and always knows what to say about trading and investments. So it's a bit of a shock.

DAVIDSON: The SEC froze several US accounts Peek and Lepik used to stash their profits and wouldn't comment on what might come next. The Estonian government plans to begin its own investigation shortly.

Adam Davidson, NPR News.

INSKEEP: This is MORNING EDITION from NPR News. I'm Steve Inskeep.

RENEE MONTAGNE (Host): And I'm Renee Montagne.

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