3 charged with stock mar­ket prof­it­ing by hack­ing

The Washington Times Daily - - POLITICS - BY AN­DREW BLAKE

The Depart­ment of Jus­tice an­nounced charges Tues­day against three Chi­nese ci­ti­zens ac­cused of gen­er­at­ing mil­lions of dol­lars by hack­ing into the com­puter sys­tems of Amer­i­can law firms and then trad­ing stocks based off of stolen in­sider knowl­edge.

Iat Hong, Bo Zheng and Chin Hung were charged in a felony in­dict­ment un­sealed in U.S. District Court in Man­hat­tan. Au­thor­i­ties said an in­sider trad­ing scheme al­lowed the three men to make more than $4 mil­lion in il­le­gal pro­ceeds in less than two years.

The Chi­nese ci­ti­zens par­tic­i­pated in a con­spir­acy from April 2014 to late 2015 that in­volved pen­e­trat­ing the com­puter net­works of law firms and sub­se­quently pil­fer­ing privileged in­for­ma­tion that was then used to turn a profit, the in­dict­ment said.

Once in­side the net­works, the hack­ers scoured com­puter sys­tems and email ac­counts for in­for­ma­tion re­gard­ing planned yet unan­nounced merg­ers and ac­qui­si­tions that could be used to their ad­van­tage on the stock mar­ket, pros­e­cu­tors said.

Au­thor­i­ties said the men would pur­chase stocks in those com­pa­nies be­fore the de­tails were pub­lished. When the ac­qui­si­tions were an­nounced, ac­cord­ing to the in­dict­ment, they quickly sold off their stocks and made im­mense prof­its.

Through var­i­ous ac­counts, the men pur­chased shares of at least five pub­licly traded com­pa­nies be­fore it was an­nounced that those firms would be ac­quired, gen­er­at­ing a profit in ex­cess of $4 mil­lion, pros­e­cu­tors said.

Specif­i­cally, pros­e­cu­tors said, the men in early 2015 ex­fil­trated 2.8 gi­ga­bytes of con­fi­den­tial data stolen from a hacked law firm that in­cluded de­tails about tech gi­ant In­tel’s plans to ac­quire Al­tera Corp., an in­te­grated cir­cuit maker.

Au­thor­i­ties said the trio used the privileged de­tails to pur­chase more than 210,000 shares of Al­tera be­fore the merger was pub­li­cized on March 27, then sold that stock shortly af­ter Al­tera’s share priced surged by roughly 26 per­cent as a re­sult of the deal.

“This case of cy­ber meets se­cu­ri­ties fraud should serve as a wake-up call for law firms around the world: You are and will be tar­gets of cy­ber hack­ing, be­cause you have in­for­ma­tion valu­able to wouldbe crim­i­nals,” U.S. At­tor­ney Preet Bharara said in a state­ment.

Mr. Hong, 26, was ar­rested in Hong Kong on Christ­mas Day and is pend­ing ex­tra­di­tion to the U.S., the Jus­tice Depart­ment said Tues­day.

Mr. Hung, 50, and Mr. Zheng, 30, were be­lieved to be still at large.

In ad­di­tion to be­ing named in the crim­i­nal in­dict­ment, all three men were charged by the Se­cu­ri­ties and Ex­change Com­mis­sion this week with fraud­u­lently trad­ing on hacked in­for­ma­tion. The SEC said it is at­tempt­ing to freeze the men’s as­sets to pre­vent them from cash­ing out be­fore they face ex­tra­di­tion and trial in the U.S.

ASSOCIATED PRESS

U.S. At­tor­ney Preet Bharara is­sued a warn­ing to law firms that they could be tar­gets of hack­ing be­cause they hold in­for­ma­tion that is valu­able to crim­i­nals.

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