Foreign National and American Trader Settle Fraud Charges in Edgar Hacking Case
Litigation Release No. 24793 / April 9, 2020
Securities and Exchange Commission v. Ieremenko et al., Case No. 19-cv-00505 (D.N.J. filed January 15, 2019)
The Securities and Exchange Commission today announced settlements with David Kwon and Igor Sabodakha, two traders who allegedly profited from trading on nonpublic corporate earnings information hacked from the SEC's EDGAR system. The settlement agreements are subject to court approval.
According to the SEC's complaint, Kwon of California, Sabodakha of Ukraine, and seven other defendants participated in a scheme to hack into EDGAR and extract material, nonpublic information to use for illegal trading. The complaint alleged that a Ukrainian hacker extracted EDGAR files containing nonpublic earnings results. Kwon and Sabodakha allegedly traded on the basis of this hacked information in the narrow window of time between when the files were extracted from EDGAR and when the information was released to the public. Sabodakha also allegedly previously traded based on material nonpublic information obtained through the hack of at least two newswire services.
Kwon and Sabodakha consented to the entry of final judgments that would permanently enjoin them from violating the antifraud provisions of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and Section 17(a) of the Securities Act of 1933. Kwon agreed to pay $165,474 in disgorgement, representing the profits from his illegal trades, and $16,254 in prejudgment interest. The settlement reserves the issue of a civil penalty for Kwon for further determination by the court upon a motion of the SEC. Sabodakha agreed to disgorge $148,804 in profits from his illegal trades, including trades he conducted in the account of his wife, Victoria Vorochek, with prejudgment interest of $20,945. Sabodakha also agreed to pay a civil penalty of $148,804. The SEC will move to dismiss the charges it had filed against Vorochek.
The SEC's continuing litigation is led by Christopher Bruckmann and Olivia Choe and supervised by Stephan Schlegelmilch. The SEC's investigation was conducted by Market Abuse and Cyber Unit staff David Bennett, Arsen Ablaev, Michael Baker, Jason Burt, Laura D'Allaird, Adam Gottlieb, James Scoggins, David Snyder, Jonathan Warner, Darren Boerner, John Marino, and John Rymas, and IT Forensics staff Ken Zavos, Douglas Bond, Stephen Haupt, Gi Nguyen, and Jennifer Ross. The Division of Economic and Risk Analysis and the Office of Information Technology provided substantial assistance. The investigation was supervised by Mr. Sansone and Carolyn Welshhans. The SEC appreciates the assistance of the U.S. Attorney's Office for the District of New Jersey, the Federal Bureau of Investigation, and the U.S. Secret Service.