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Prosecutors bring criminal case over hacking, insider trading

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(Reuters) — U.S. prosecutors will announce the indictment of nine individuals on Tuesday on charges they were part of an insider trading ring based on cyber hacking of disseminators of news releases, according to a person familiar with the matter.

A press conference to announce indictments of nine people, in what authorities called an international hacking and insider trading scheme that generated more than $30 million of illegal profit, is scheduled for 11:30 a.m. EDT in Newark, New Jersey.

The case alleges that a ring of cyber criminals from Ukraine hacked into company press-release publishers to steal corporate news before it was made public, the person familiar with the matter said.

Prosecutors believe the hackers then passed the information to a group of traders, who were mostly based in the United States and reaped at least $30 million in illicit profits by trading in hundreds of companies, including Fortune 500 companies, using the nonpublic information, the person said.

The case, brought jointly by the U.S. Attorney's offices in Brooklyn and New Jersey, marks the first time prosecutors have alleged that a securities fraud scheme was based on hacked inside information.

It is also the largest known suspected case of hacking that resulted in insider trading.

The lead trader in the case is suspected of making more than $17 million, according to the person familiar with the matter.

The press release distributors that the hackers tapped into were PRNewswire Association L.L.C., Marketwired and Business Wire, a unit of Warren Buffett's Berkshire Hathaway Inc.

Federal prosecutors in Brooklyn and New Jersey could not immediately be reached for comment outside regular U.S. business hours.

Until now, the U.S. Securities and Exchange Commission has brought only a handful of civil cases against hackers.

In 2007, the agency filed a civil case against a Ukrainian trader named Oleksandr Dorozhko, accusing him of hacking into IMS Health Holdings Inc. and stealing information on earnings that he used to make profitable options trades. In 2010, a federal court ordered Mr. Dorozhko to pay $580,000.