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Two indicted in huge international hacking/fraud scheme are Forsyth County residents
Authorities say they were part of $100 million illegal trading scheme
Alexander Garkusha
Garkusha

FORSYTH COUNTY — Two Forsyth County residents and two men from nearby Alpharetta are among nine suspects indicted this week in an international computer hacking and securities fraud scheme that reportedly generated about $100 million in illegal profits.

Authorities say the scheme is the largest of its kind to be prosecuted.

Leonid Momotok, who lives off Sugar Ridge Drive south of Windermere Golf Club, and Alexander Garkusha, who lives off Preserve Crossing Lane near Drew Campground and Post roads in west Forsyth, were taken to Hall County Jail.

Forsyth County Sheriff’s Office deputies assisted in the arrests, according to Robin Regan, a spokesman for the agency.

Stephanie Shark, a special agent for the FBI’s New York press office, said the suspects, both 47, may have been taken to neighboring Hall County instead of the Forsyth County Detention Center due to existing contracts between the jail and the U.S. Marshalls Service.

They were charged by the Eastern District of New York with wire fraud conspiracy, securities fraud conspiracy, securities fraud and money laundering conspiracy.

The Alpharetta residents were identified as Arkadiy Dubovoy, 51, and Igor Dubovoy, 28. All four Forsyth area men were arrested at their homes.

The suspects were expected to appear Wednesday afternoon before U.S. Magistrate Judge Alan J. Braverman in federal court in Atlanta.

The remaining five suspects hail from the Ukraine, Pennsylvania and Brooklyn. International arrest warrants were issued Wednesday.

The federal indictments, based in Brooklyn, N.Y., and Newark, N.J., accuse the individuals of hacking into three business newswires and stealing about 150,000 press releases on hundreds of companies. Those not-yet-public press releases contained financial information used for trading on the NASDAQ and NYSE.

“This is the story of a traditional securities fraud scheme with a twist, one that employed a contemporary approach to a conventional crime,” said FBI Assistant Director-in-Charge Diego Rodriguez.

For example, according to a report by the Associated Press, Panera Bread sent out a press release in October 2013 that announced it was adjusting its earnings expectations downward for the next quarter.

Computer hackers and stock traders reportedly got hold of the release early by electronically breaking into Marketwired L.P., a Toronto business newswire.

They allegedly made $17 million in trades that bet the stock of Panera — a café chain that sells pastries, soups and sandwiches — would lose value once the news was announced.

When they were correct, they raked in nearly $1 million in profit, according to the criminal indictment unsealed Tuesday.

The incident “illustrates the risks posed for our global markets by today’s sophisticated hackers,” said Mary Jo White, chair of the U.S. Securities Exchange Commission.

“Today’s international case is unprecedented in terms of the scope of the backing at issue, the number of traders involved, the numbers of securities unlawfully traded and the amount of profits generated.”

According to an FBI press release, PR Newswire Association and Business Wire were the two other newswires affected. Other companies that had nonpublic information stolen include Home Depot, Hewlett Packard, Caterpillar Inc., Verisign Inc. and Silicon Valley’s Align Technology Inc.

The nine people indicted — including two Ukrainian computer backers and six stock traders — allegedly garnered about $30 million of the total profits.

They reportedly used about 800 of the news releases stolen between 2010 and 2015 to make trades in time gaps ranging from hours to three days.

Prosecutors asserted one way the group tapped into the newswires’ computers systems was by using passwords stolen through phishing, a common scam involving hackers sending an email with a seemingly innocent link that, if clicked on, can lead to the recipient’s personal information being revealed.

“Every employee of every company has to be vigilant about the emails they get from people who look like their friends or acquaintances, urging them to click on a link,” said U.S. Attorney Paul J. Fishman of the District of New Jersey.

Wire fraud and securities fraud, the most serious charges in the indictments, carry up to 20 years in prison and fines ranging from $250,000 to $5 million.

Civil charges were also brought by the SEC against the nine plus 23 other individuals or companies in the U.S. and Europe.

 

The Associated Press contributed to this report.