Malta-based hedge fund involved in $100 million fraud 


US authorities file complaint against Exante Ltd, a Malta-based hedge fund, involved in international securities fraud scheme

The US Securities and Exchange Commission (SEC) yesterday announced fraud charges against 32 defendants for taking part in a scheme to profit from stolen non-public information about corporate earnings announcements.

A Malta-based hedge fund is among the companies involved in the scheme which saw traders and hackers make as much as $100 million in illegal profits over five years by conspiring to use information stolen from thousands of corporate press statements before their public release.

Related article: SEC Charges 32 Defendants in Scheme to Trade on Hacked News Releases 

Those charged include two Ukrainian men who allegedly hacked into newswire services to obtain the information and 30 other defendants in and outside the US who allegedly traded on it.

Exante Ltd. is a Malta-based hedge fund which according to the US authorities holds proprietary trading accounts at Interactive Brokers  and at Lek Securities, which were used in connection with the fraudulent scheme to make trades resulting in approximately $24.5 million in ill-gotten gains.

Exante is owned by Lartemisis Holdings Ltd which shares the same address as Portomaso Tower in St Julian’s. Three of the company’s five directors have Maltese addresses.

Bruno Cakans and Gatis Eglitis live in St Julian’s while Alexey Kirienko has a Sliema address. The two other directors; Anatoli Knyazev and Vladimir Masliakov live in Moscow, Russia.

In its complaint, the US Securities and Exchange Commission said that several of Exante’s directors are also owners of defendant Global Hedge Capital Fund Ltd., and the two entities share employees.

Exante and Global Hedge frequently made illicit trades in the same securities, on the same days and around the same time, and often through the same IP addresses,” the commission said.

US prosecutors said the Ukraine-based hackers, who were given “shopping lists” of press releases by the traders based in Malta, New York, Cyprus, France and Russia, improperly accessed press statements before the distributors planned to release them to the public.

The hackers created a “video tutorial” to help traders see the stolen releases and were paid a portion of the profits from trades based on the information in them, prosecutors said.

The nine people were indicted by grand juries in Brooklyn, New York, and Newark, New Jersey, on charges that they made $30 million in illegal profits starting around February 2010. Five were arrested on Tuesday. International arrest warrants were issued for the other four.

At times, the hackers and traders had a very narrow window of opportunity to extract and use the allegedly hacked information.  In one particularly dramatic instance on 1 May, 2013, the hackers and traders allegedly moved in the 36-minute period between a newswire’s receipt and release of an announcement that a company was revising its earnings and revenue projections downward.

According to the SEC’s complaint, 10 minutes after the company sent the still-confidential release to the newswire, traders began selling short its stock and selling CFDs, realizing $511,000 in profits when the company’s stock price fell following the announcement.

The SEC’s complaint charges each of the 32 defendants with violating federal antifraud laws and related SEC antifraud rules and seeks a final judgment ordering the defendants to pay penalties, return their allegedly ill-gotten gains with prejudgment interest, and be subject to permanent injunctions from future violations of the antifraud laws.

Source: MaltaToday – Malta-based hedge fund involved in $100 million fraud

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