US charges 3 Chinese traders with hacking law firms

The hackers profited from deals and speculation involving the drug-maker Intermune, chipmaker Intel and business services company Pitney Bowes.
The hackers profited from deals and speculation involving the drug-maker Intermune, chipmaker Intel and business services company Pitney Bowes.PHOTO: BLOOMBERG

NEW YORK • Three Chinese hackers made more than US$4 million (S$5.8 million) in illicit profits after breaking into the servers of top corporate law firms in New York, the United States said in announcing charges and the arrest of one of the men.

The three targeted at least seven major law firms, retained by companies to advise on deals, and got into the e-mail accounts of senior lawyers at two of the firms, according to the indictment on Tuesday.

They profited from deals and speculation involving the drug-maker Intermune, chipmaker Intel and business services company Pitney Bowes, the US said.

The case places law firms among the widening group of targets of cybercriminals seeking to profit from insider information.

Last year, the US broke up an international ring of hackers who allegedly infiltrated the servers of PR Newswire Association, Marketwired and Business Wire and stole market-moving press releases before they were published.

The group reportedly made more than US$100 million from trading on the information.

In the current case, the three men - Iat Hong and Chin Hung, 50, of Macau, and Bo Zheng, 30, of China - worked at a robotics company that was started by Zheng. Hong, 26, was arrested in Hong Kong on Christmas Day and is awaiting extradition. The US Securities and Exchange Commission is also seeking to freeze an account registered in the name of Hong's mother.

The men also hacked other robotics companies, the US said. They allegedly stole schematic designs of a robot vacuum cleaner made by a US firm.

The three generally used the same tactics to get the information. They would get the log-in credentials of an employee and place malware on a server that allowed them to access the e-mail of key people at the companies, according to the indictment. In a one-day period in 2014, they took 10 gigabytes of confidential data from one law firm's server, the US said.

The law firms were not identified in the complaints. The Wall Street Journal reported in March that Cravath Swaine & Moore and Weil Gotshal & Manges were among the targeted law firms.

The three men allegedly bought Intermune shares based on the information gleaned from the hacked data. Though the deal did not close, they still made money as shares rose on media reports that Intermune was seeking a tie-up. The company was ultimately purchased by Roche. Cravath advised it on the deal.

In another deal, the group allegedly bought shares of chipmaker Altera Corp after Intel had retained one of the law firms to advise on an acquisition. They scored US$1.4 million in profits on the trade amid media reports of the pending deal, and sold their shares before it was publicly announced. Weil Gotshal was one of the law firms advising Intel.

Using information gleaned from another law firm, the trio also bought shares of Borderfree, an online commerce site that was an acquisition target of Pitney Bowes, the US said. They made a profit of US$841,000 on the trades after the deal was announced on May 18 last year, said the indictment.

BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on December 29, 2016, with the headline 'US charges 3 Chinese traders with hacking law firms'. Print Edition | Subscribe