The arrest of three Chinese nationals in late December poses new issues on cybersecurity, exposing law firms to be vulnerable to fraud. The hackers specifically targeted law firms handling client companies that are likely to agree on mergers and acquisitions.
U.S. authorities warned that other markets may also be a target of hacking as the United States is not the sole territory with stock exchanges, which are deemed to be prone to cyberattack.
In light of this, Initial Public Offerings (IPO) will not cease between Hong Kong and mainland China despite political and economic turmoil.
In the complaint filed by the U.S. prosecutors in Manhattan federal court, the three Chinese hackers are facing charges of computer intrusion, conspiracy, wire fraud and insider trading.
During the investigation, authorities obtained details on how the cyber-criminals executed their plan. They target law firms in New York that handle companies contemplating or engaging in mergers and acquisitions. At least two law firms were compromised by the three Chinese cyber hackers.
Japan Times reported that the cyberattack that happened in 2014 and 2015 enabled the hackers to gain around $4 million by trading five company stocks based on the information they obtained through hacking.
Although the compromised law firms were not named on the complaint, the charges indicated that the hackers benefited from the mergers and acquisitions of Pitney Bowes Inc. and Intel Corporation.
According to the complaint, which was reported by Forbes, the three hackers--Iat Hong, Chin Hung and Bo Zheng--planted a malware on the law firms' computer systems to unlawfully obtain non-public information from email exchanges, particularly on deals on mergers and acquisitions.
They also allegedly hacked an administrator account to manage the firms' email servers while successfully obscuring the hack by making it appear the malware is harmless. To cover up the stolen files, the hackers renamed them.
The indictment further states that besides the two law firms involved, the Chinese hackers attempted to attack servers and computer networks of other five law firms. Of the three Chinese hackers arrested, only Iat Hong, whose arrest was made in Hong Kong, will be extradited to face charges in the United States.