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Computer Hacking and Insider Trading Liability

The Justice Department filed criminal complaints in early August in the U.S. District Courts for New Jersey and the Eastern District of New York against several computer hackers and traders. The complaints allege violations of a host of federal anti-fraud statutes, including Sections 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934.[1]

Days later the U.S. Securities and Exchange Commission filed a civil action in U.S. District Court for New Jersey against the same defendants and several others, alleging violations of Section 17(a) of the Securities Act of 1933 and Section 10(b) and Rule 10b-5 of the Exchange Act.[2]

The cases accuse "hacker defendants" of hacking into U.S. newswire services to gain access to pending press releases of publicly held companies and then selling the stolen information to "trading defendants" who allegedly acted on the stolen information.

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