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Ukrainian Hacker to Forfeit $580,000 after Trading on Stolen Information

By Clea

After hacking into Thomson Financial?s computer network to obtain nonpublic financial information about pharmaceutical consultancy IMS Health, a Ukrainian man was ordered by a U.S. judge to pay $580,000 in penalties, according to Reuters News Agency.

Just after obtaining the information?and right before an earnings release?Oleksandr Dorozhko purchased 630 put options on IMS? common stock, according to Reuters. The next day IMS? stock dropped by 28 percent and Dorozhko earned $287,346 after selling the options.

The SEC filed a complaint against Dorozhko in late 2007, but on January 7, 2008, the District Court denied the SEC?s motion for a preliminary injunction, according to a statement by the SEC. The Court concluded that ?Dorozhko’s alleged ’stealing and trading’ or ‘hacking and trading’ does not amount to a violation ? because Dorozhko did not breach any fiduciary or similar duty ‘in connection with’ the purchase or sale of a security.?

Upon appeal, the U.S. Court of Appeals for the Second Circuit thought otherwise, saying ?that nothing in the U.S. Supreme Court’s jurisprudence or prior decisions of our Court expressly imposes a fiduciary-duty requirement on the ordinary meaning of ‘deceptive’ where the alleged fraud is an affirmative misrepresentation rather than a nondisclosure.?

After the case was sent back to the District Court, the judge ordered the $580,000 penalty.

Full post as published by Ethisphere Blog - Good. Smart. Business. Profit. on March 31, 2010 (boomark / email).