Chinese hackers steal merger info, make $4M from insider trading

A Macau resident has been arrested along with two other individuals accused of hacking two New York law firms involved in high-profile M&A transactions, announced the US Attorney”s office.

By infecting email servers with malware, between April 2014 and late 2015, the three Chinese nationals – Iat Hong, Bo Zheng and Chin Hung – stole 2.8 gigabytes of confidential information about major mergers and acquisitions from multiple email accounts of lawyers involved in the deals. Only two law firms were breached, out of the seven originally targeted.

The men “allegedly stole nonpublic information through unauthorized access to law firms” computers, and used the information for their own personal gain,” said FBI Assistant Director-in-Charge William F. Sweeney Jr.

The stolen inside information was used to purchase shares in certain top-level takeovers before the acquisitions were publicly announced. Once the deals went public and the prices rose, the defendants sold stock for more than $4 million in profit. One intercepted merger was the Intel-Altera Transaction that brought the criminals a profit of $1.4 million.

“As alleged, the defendants – including Iat Hong, who was arrested in Hong Kong on Christmas Day – targeted several major New York law firms, specifically looking for inside information about pending mergers and acquisitions,” said Manhattan U.S. Attorney Preet Bharara. “They allegedly hacked into two prominent law firms, stole the emails of their M&A partners, and made over $4 million in illegal profits. 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.”

Iat Hong was arrested in Hong Kong on Dec. 25, and the three awaiting extradition to the US. 13 charges have been brought against them, leading to minimum 50 years in prison.