The U.S. Securities & Exchange Commission has brought an emergency action against an Estonian investment bank, claiming that it has hacked into a corporate news release database and traded on impending news.

In an emergency federal court action filed today, the SEC charged Lohmus Haavel & Viisemann, an Estonian financial services firm, and two of its employees, Oliver Peek and Kristjan Lepik, with conducting a fraudulent scheme involving the electronic theft and trading in advance of more than 360 confidential press releases issued by more than 200 U.S. public companies.

The commission alleges that the defendants fraudulently stole the confidential information from the website of Business Wire, a disseminator of news releases and regulatory filings for companies and groups throughout the world, and since January 2005 have made at least US$7.8 million in illegal profits. These allegations have not been proven.

Acting on the commission’s request, the US District Court for the Southern District of New York today issued a temporary restraining order which, among other things, freezes the defendants’ assets and orders the repatriation of funds taken out of the U.S.

“Our action today demonstrates that we will seek out and stop securities fraud wherever we find it. Whether in an old-fashioned boiler room or, as in this case, in the high-tech environs of the internet, such conduct will be met with a swift and vigorous enforcement response,” said Linda Chatman Thomsen, director of the SEC’s Division of Enforcement.

“We acted today to stop a clever and pernicious securities fraud and to preserve funds for investors. This case highlights that even when fraudsters invent new ways to violate the securities laws, the Commission will track them down and stop them, wherever they are located,” added Daniel Hawke, associate district administrator of the SEC’s Philadelphia District Office.

The commission’s complaint alleges that, in June 2004, Lohmus became a client of Business Wire for the sole purpose of gaining access to Business Wire’s secure client website. Once defendants had access, they surreptitiously utilized a software program, a so-called “spider” program, which provided unauthorized access to confidential information contained in impending nonpublic press releases of other Business Wire clients, including the expected time of issuance.

The complaint further alleges that the information fraudulently stolen by the defendants has allowed them to strategically time their trades around the public release of news involving, among other things, mergers, earnings, and regulatory actions. Using several U.S. brokerage accounts, the defendants have bought long or sold short the stocks of the companies whose confidential press release information they have stolen, and purchased options to increase their profits.

The complaint seeks permanent injunctive relief, the disgorgement of all illegal profits, together with prejudgment interest, and the imposition of civil monetary penalties.