29.12.16

Three Chinese Citizens Charged with Trading Hacked Material

The U.S. federal government has criminally charged three Chinese citizens for trading on confidential corporate information that was obtained by hacking into the systems of U.S. law firms working on company mergers. The indictment, filed in Manhattan federal court, includes charges of conspiracy, insider trading, wire fraud, and computer intrusion. According to the prosecution, the Chinese individuals made over $4 million by placing trades in at least five company stocks based on the insider information obtained through computer breaches into unnamed law firms. One of the three was arrested in Hong Kong on Sunday while the other two are not in custody.
The Cipher Take: China—unlike other active adversaries in cyberspace such as Russia, Iran, and North Korea—primarily uses the cyber domain to conduct economic espionage, stealing information that is useful for businesses in China, including state-owned enterprises (SOEs). This is not the first instance where the U.S. has indicted Chinese nationals on charges of economic espionage through cyber breaches. In 2014, the United States charged Chinese military hackers with cyber espionage against six American companies in the nuclear energy, metals, and solar products industries. U.S. law firms are prime targets as they have valuable information regarding business transactions—creating a nexus between cybersecurity and securities fraud. Those charged were able to access the stolen information by breaching two law firms working on mergers and acquisitions via email credentials stolen from one of the firm’s employees—likely through a phishing campaign.

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