SEC Files Emergency Action Against Estonian Traders to Stop Ongoing Fraudulent Hacking Scheme

["Richard M. Smith" <rms () computerbytesman com>]

http://www.sec.gov/news/press/2005-155.htm

FOR IMMEDIATE RELEASE
2005-155


Foreign Traders Used Computerized "Spider" Program to Fraudulently Steal
Nonpublic Issuer Press Release Information from Commercial Wire Service


Washington, D.C., Nov. 1, 2005 - In an emergency federal court action filed
today, the Securities and Exchange Commission charged Lohmus Haavel &
Viisemann (Lohmus), an Estonian financial services firm, and two of its
employees, Oliver Peek and Kristjan Lepik, with conducting a fraudulent
scheme involving the electronic theft and trading in advance of more than
360 confidential press releases issued by more than 200 U.S. public
companies. The Commission alleges that the defendants fraudulently stole the
confidential information from the website of Business Wire, a leading
commercial disseminator of news releases and regulatory filings for
companies and groups throughout the world, and since January 2005 have made
at least $7.8 million in illegal profits.

Acting on the Commission's request for emergency relief, the United States
District Court for the Southern District of New York today issued a
temporary restraining order which, among other things, freezes the
defendants' assets and orders the repatriation of funds taken out of the
United States.

"Our action today demonstrates that we will seek out and stop securities
fraud wherever we find it. Whether in an old-fashioned boiler room or, as in
this case, in the high-tech environs of the internet, such conduct will be
met with a swift and vigorous enforcement response," said Linda Chatman
Thomsen, Director of the Commission's Division of Enforcement.

"We acted today to stop a clever and pernicious securities fraud and to
preserve funds for investors. This case highlights that even when fraudsters
invent new ways to violate the securities laws, the Commission will track
them down and stop them, wherever they are located," said Daniel M. Hawke,
Associate District Administrator of the Commission's Philadelphia District
Office.

The Commission's complaint alleges that, in June 2004, Lohmus became a
client of Business Wire for the sole purpose of gaining access to Business
Wire's secure client website. Once defendants had access, they
surreptitiously utilized a software program, a so-called "spider" program,
which provided unauthorized access to confidential information contained in
impending nonpublic press releases of other Business Wire clients, including
the expected time of issuance.

The complaint further alleges that the information fraudulently stolen by
the defendants has allowed them to strategically time their trades around
the public release of news involving, among other things, mergers, earnings,
and regulatory actions. Using several U.S. brokerage accounts, the
defendants have bought long or sold short the stocks of the companies whose
confidential press release information they have stolen, and purchased
options to increase their profits.

Named in the Commission's complaint are the following defendants.

Lohmus Haavel & Viisemann, headquartered in Tallinn, Estonia, is an
investment bank established in 1999. Lohmus, which also has offices in
Latvia and Lithuania, provides corporate financing, private equity, asset
management, investment services, and structured financing services to the
Eastern European market.

Oliver Peek, age 24, is a citizen of Estonia currently residing in Tallinn.
Peek is employed by Lohmus and works for its investment services team.

Kristjan Lepik, age 28, is a citizen of Estonia currently residing in
Tallinn. Lepik is a partner at Lohmus.

As a result of the defendants' conduct, the Commission alleges that the
defendants violated Section 10(b) of the Exchange Act and Rule 10b-5
thereunder. The complaint seeks permanent injunctive relief, the
disgorgement of all illegal profits, together with prejudgment interest, and
the imposition of civil monetary penalties.

The Commission wishes to acknowledge the assistance of the New York Stock
Exchange, the NASD, the Philadelphia Stock Exchange, the Chicago Board
Options Exchange, and the Pacific Exchange.

  <http://www.sec.gov/images/arrowright_dkblue.gif> See also: Litigation
<http://www.sec.gov/litigation/litreleases/lr19450.htm> Release

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For further information contact:

Daniel M. Hawke, Associate District Administrator
David S. Horowitz, Assistant District Administrator
Amy J. Greer, District Trial Counsel
Philadelphia District Office
215-597-3100


http://www.sec.gov/news/press/2005-155.htm

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