SEC And DoJ Charge UK Citizen In $3.75 Million Hack-and-trade Scheme

Robert B. Westbrook, a 39-year-old citizen of the United Kingdom, has been charged by the U.S. Securities and Exchange Commission (SEC) and the U.S. Department of Justice (DOJ) for allegedly executing a multimillion-dollar hacking and trading scheme.

The scheme involved unauthorized access to the computer systems of five U.S. public companies to obtain material nonpublic information prior to their earnings announcements, resulting in illicit profits of approximately $3.75 million.

Advanced data analytics and crypto asset tracing were crucial in uncovering Westbrook’s fraud

The SEC’s complaint, filed in the U.S. District Court for the District of New Jersey, accuses Westbrook of hacking into corporate systems between January 2019 and August 2020. Using techniques such as resetting passwords for executive email accounts, he allegedly accessed confidential earnings information, which he used to trade securities before public announcements. This activity was designed to conceal his identity through the use of anonymous email accounts, VPNs, and cryptocurrencies.

Jorge G. Tenreiro, Acting Chief of the SEC’s Crypto Assets and Cyber Unit, stated, “The SEC is engaged in ongoing efforts to protect markets and investors from the consequences of cyber fraud.” He emphasized that advanced data analytics and crypto asset tracing were crucial in uncovering Westbrook’s alleged fraud, despite his attempts to hide his identity.

In parallel with the SEC’s civil charges, the DOJ announced criminal charges against Westbrook. He has been indicted on securities fraud, wire fraud, and five counts of computer fraud. Westbrook was arrested in the U.K. this week and is expected to be extradited to face these charges in the United States.

According to court documents, Westbrook’s activities included implementing auto-forwarding rules that allowed him to receive content from compromised executive email accounts. The SEC and DOJ outlined that his actions violated multiple provisions of federal securities laws, leading to potential penalties including substantial fines and lengthy prison sentences.

Westbrook risks up to 20 years in prison

If convicted, Westbrook could face a maximum of 20 years in prison for securities and wire fraud, and five years for each count of computer fraud. The investigation was conducted by the FBI and involved collaboration with other regulatory authorities, including the U.K. Financial Conduct Authority.

The SEC is actively pursuing this case, seeking civil penalties, the return of illicit gains, and an injunction against future violations of federal securities laws.

The SEC’s Crypto Assets and Cyber Unit is a specialized division within the U.S. Securities and Exchange Commission (SEC) focused on safeguarding investors in the evolving crypto market and addressing cyber-related threats. Established in 2017, the unit has grown significantly, increasing its staff to 50 members as of May 2022 to enhance its enforcement capabilities. This expansion aims to address the rising complexities in cryptocurrency regulation and cyber risk management​.

The unit investigates violations of federal securities laws related to various aspects of the crypto marketplace, including exchanges, decentralized finance (DeFi) platforms, and non-fungible tokens (NFTs). Since its inception, it has successfully brought over 80 enforcement actions against fraudulent and unregistered crypto offerings, resulting in more than $2 billion in penalties​.

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