The Securities and Exchange Commission (SEC) fined three Chinese citizens $8.8 million for trading on insider information after hacking into two New York law firms.
According to a report, Iat Hong, Bo Zheng, and Hung Chin made close to $3 million in illegal profits by accessing non-public information pertaining to upcoming mergers and acquisition deals. The defendants had accessed email accounts at the unnamed law firms and downloaded gigabytes of data. The defendants were able to access the email accounts after installing malware on the companies networks. The report noted five other law firms were targeted, but they were unable to get into those systems.
The report noted the SEC charged the three spent roughly $7.5 million over the course of a one-month period, purchasing shares in Altera Inc., the semiconductor company, ahead of a 2015 report that it was in talks to be acquired by Intel Corporation in one example of how they profited on the insider information.
“We used enhanced trading surveillance and analysis capabilities that we developed over the last few years to identify the broad scope of the defendants’ alleged scheme, including the use of both U.S. and offshore accounts to carry it out,” says Stephanie Avakian of the SEC’s Enforcement Division in the report. “This action demonstrates our commitment and effectiveness in rooting out cyber-driven schemes no matter how sophisticated.”
The scam started in the beginning of April 2014, with the three hacking into a U.S. law firm and going after the email accounts of partners that worked on M&A, noted Reuters. Prosecutors didn’t name the law firms, but the report said one matched the description of law firm Cravath, Swaine & Moore. That firm represented Pitney Bowes when it acquired Borderfree in 2015. Cravath declined to comment on the report.
According to the indictment, the defendants installed malware on the servers to get access to emails the lawyers sent. The indictment also contends the three stole and traded on information from Intel’s buy of Altera in 2015.