SEC in legal fight with Estonians over financial hack

The US Securities and Exchange Commission (SEC) has launched a legal attack on two men and the financial firm they work for, claiming they carried out a fraudulent hacking scheme that netted them $7.8m.

The US regulator has filed an "emergency federal court action" against Estonian finance house Lohmus Haavel and Viisemann and employees Oliver Peek (aged 24) and Kristjan Lepik (28).

The SEC maintains the two used a spider program to steal information relating to more than 360 embargoed press releases in advance of their official distribution date from the news and PR website Business Wire.

A statement from the SEC claims information stolen allowed the two to time their trades around the release of news involving, mergers, earnings and regulatory action. Using US accounts, the defendants are said to have bought stocks long or sold short.

Business Wire said that while all computer systems are vulnerable to hacking, no press releases were stolen but some screen shots taken.

In a statement, Lorry Lokey, Business Wire CEO, said: "No one gained access to our news release file prior to distribution to the media and investment community. Some of the SEC statements in its complaint have been misinterpreted."

The SEC's complaint states that in June 2004 Lohmus became a client of Business Wire, which gave it access to its secure client website, after which a spider program was used.

However, the SEC could be moving into a grey area as a spider program does not circumnavigate access controls to a system but crawls around a site from weblink to weblink, reporting information back to its owner. The SEC may have to examine whether the spider predicted a weblink that was not publically available and then prove that was 'hacking' in order to prosecute the firm.

A New York court has issued a temporary restraining order to freeze the defendants' assets.

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

Kristjan Lepik is also Estonian and currently residing in Tallinn. Lepik is a partner at Lohmus.

Lohmus, which also has offices in Latvia and Lithuania, did not respond to a request for comment.