U.S. SEC targets Estonian firm

  • 2005-11-02
  • By TBT staff
RIGA - The U.S. Securities and Exchange Commission has accused the Estonian investment firm Lohmus Haavel & Viisemann and two of its employees of stealing confidential information from the Business Wire Web site.

"Foreign traders used a computerized 'spider' program to fraudulently steal nonpublic issuer press release information from commercial wire service," the SEC announced Oct. 31.

The SEC said the defendants, LHV and its employees Oliver Peek and Kristjan Lepik, stole and traded in advance more than 360 confidential press releases issued by more than 200 U.S. public companies.

The commission alleges that the defendants have since January 2005 made at least $7.8 million in illegal profits.

The commission's complaint alleges that the stolen information enabled the defendants to time their trades around the public release of news involving mergers, earnings and regulatory actions. The defendants have bought long or sold short the stocks of the companies whose confidential press release information they stole, and purchased options to increase their profits.

According to LHV, the investigation concerns the LHV Trader product meant for professional traders and is at present focused on five client accounts. "Persons who have not used the said confidential information have no cause to worry," CEO Rain Tamm said.

In Tamm's opinion, it is possible that the SEC was premature in accusing LHV employees. "Nevertheless, we have suspended both persons' activity in the firm and started an in-house investigation," he said. "We are giving every possible assistance to the U.S. securities regulator to find out the reasons of this situation and resolve it."

The CEO also ruled out the possibility that a hacker-attack against a U.S. news portal originated from LHV's system. "We have our own theories of how we could be linked with this, but they have to be first confirmed by the investigation we launched," he said.

The lawsuit filed by the SEC said Business Wire took a sampling of about 10 press releases it had disseminated as of Oct. 28, 2005 and in which there had been trading by LHV-related accounts. Business Wire confirmed the spider program had retrieved confidential information about each of those news releases.

A hearing on the SEC's request is set for Nov. 8.