Accused hackers make millions off insider trading info

Three Chinese men allegedly hacked two New York law firms and made more than $4 million from the information they stole.

Alfred Ng Senior Reporter / CNET News
Alfred Ng was a senior reporter for CNET News. He was raised in Brooklyn and previously worked on the New York Daily News's social media and breaking news teams.
Alfred Ng
3 min read

The three alleged hackers are accused of installing malware on two law firms' servers and using stolen emails as insider information on billion-dollar deals.

James Martin/CNET

The US district attorney charged three Chinese citizens for hacking two law firms and making more than $4 million from the information they allegedly stole.

The three men, identified as Iat Hong, Bo Zheng and Chin Hung, are accused of targeting law firms that specialized in mergers and acquisitions and hacking their email servers to siphon off insider trading scoops. The three had targeted seven law firms in New York, and successfully breached two unnamed firms, Preet Bharara, the US district attorney for New York, said in a statement on Tuesday.

"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 would-be criminals," Bharara said in the statement.

The hackers were able to buy shares for cheap before anyone else knew how much they would shoot up in value from the acquisition, investigators said. Hong, Zheng and Hung looked to hack the lawyers who were helping these deals go through, according to the district attorney's office.

That's how they were able to make $1.4 million off of Intel's $16.7 billion merger with Altera in March 2015, officials said.

Hong, Zheng and Hung had accessed one of the law firm's web server as early as July 2014 through illegally obtained credentials of one of its employees and installed malware on the server, according to the Federal Bureau of Investigation. The trio had a list of 11 partners at the law firm who could provide the most valuable information.

The malware helped the three men allegedly steal about 2.8 gigabytes of insider trading information, including an email on January 29, 2015 that included the deal terms and the proposed price Altera would be purchased for by the chipmaker.

On 26 occasions, the alleged thieves purchased shares of Altera stock, netting more than 210,000 shares before selling it for a $1.4 million profit. After Intel's acquisition, Altera's share price had jumped by $9, 26 percent more than what they bought it for.

Between August 1 and August 9, 2014, the three men also stole more than 50 gigabytes of confidential details from that law firm's email server, prompting them to buy 18,000 shares of Intermune stock before the drug maker was sold to Roche AG -- netting the accused hackers $380,000 in profit.

They did the same for another New York law firm, targeting the firm's mergers and acquisitions partners, and installing malware on the servers. They allegedly made $841,000 off Borderfree, an e-commerce company, after it was acquired by Pitney Bowes in 2015.

The US district attorney's office said this happened on at least 10 other deals, all using information the three hackers allegedly stole from the two law firms.

While they weren't successful in hacking into the other five law firms, the three are accused of attempting to breach the servers on more than 100,000 occasions.

The three are also accused of hacking into rival robotics companies and stealing confidential designs from their email servers between April 2014 and late 2015. Zheng, Hong and Hung were involved in a start-up robotics company, according to the affidavit (PDF).

The three face at least 50 years in prison for their 13 charges and are awaiting extradition for an appearance in January.