U.S. prosecutors have charged three Chinese citizens with insider trading on confidential corporate information, allegedly gathered by hacking into the servers and networks of law firms involved in corporate mergers and acquisitions.
Prosecutors claim that the men stood to profit over $4 million due to insider information gained from unnamed law firms which was then used to place trades in at least five company stocks, according to Reuters.
The hackers allegedly made $380,000 on trades of Intermune, a drug manufacturer bought by Germany’s Roche in 2014; $1.4 million in trades on Altera, bought by chip-maker Intel in 2015; and $841,000 on Borderfree, acquired by Pitney Bowes in 2015.
In a related civil lawsuit, the men supposedly claimed to be working at information technology companies and listed themselves among brokerage records, according to the Securities and Exchange Commission. According to an indictment filed in Manhattan federal court, Iat Hong of Macau, Bo Zheng of Changsha in China and Ching Hung of Macau were all charged with conspiracy, wire fraud, computer intrusion and insider trading.
Hong was arrested on Sunday in Hong Kong, while Hung and Zheng aren’t in custody.
Speaking about the cybercrime-related charges, US Attorney Preet Bharara stated:
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, becauase you have information valuable to would-be criminals.
US prosecutors allege that the trio began obtaining inside information by targeting and successfully hacking two US law firms since April 2014. More specifically, the email accounts of law firm partners working on mergers and acquisitions were targeted.
The cybercriminals allegedly installed malware on the firm’s servers, according to the indictment, to access lawyers’ emails, including one partner of the law firm responsible for a significant deal.
As things stand, the US government is seeking the extradition of Hong, who is currently in custody in Hong Kong.
Image credit: Pexels.
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