April 9, 2020 / 6:12 PM / 4 months ago

U.S. SEC settles with two traders over EDGAR filing system hack

FILE PHOTO: The U.S. Securities and Exchange Commission logo adorns an office door at the SEC headquarters in Washington, June 24, 2011. REUTERS/Jonathan Ernst

WASHINGTON (Reuters) - The U.S. securities regulator on Thursday said it had settled with two traders who allegedly made money trading on material nonpublic information stolen through a hack into the agency’s EDGAR electronic filing system.

The traders were among several defendants charged by the agency last year for a 2016 hack that the Securities and Exchange Commission said reaped $4.1 million from illegal trades, and that exposed a security weakness in test filings sent to the system’s servers.

The two traders, David Kwon and Igor Sabodakha, have consented to final judgments and to disgorge their profits as well as pay prejudgment interest in a settlement yet to be approved by a court, the SEC

The “defendants engaged in an international scheme to obtain and use hacked information to enrich themselves,” Joseph G. Sansone, chief of the SEC’s market abuse unit, said in a statement about the settlement.

From at least May 2016 into at least October 2016, a Ukrainian hacker and others used a “variety of deceptive means” including phishing emails to obtain thousands of nonpublic filings from EDGAR, the agency said in its complaint.

Sabodakha was accused of trading on about 49 occasions on information acquired through the hack during that time period. In addition to giving up $148,804 in ill-gotten gains, he has also agreed to pay a fine of the same size, the SEC said.

The agency said it would dismiss charges it had filed against his wife, Victoria Vorochek, whose account he used to conduct trades.

Kwon traded on approximately 18 occasions from July through October 2016 on information hacked from EDGAR before it was made public, the filings said. He agreed to give up $165,474 in ill-gotten gains.

The agreements are subject to court approval.

Reporting by Lisa Lambert and Chris Prentice in Washington; Editing by Chris Reese and Steve Orlofsky

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