Federal prosecutors say hackers have a new scheme to beat the stock market-- breaking into websites of financial newswires and trading off the information before it becomes public.
U.S. officials are charging nine people with securities fraud, wire fraud and other charges related to the alleged plot. Authorities say the cyber crooks infiltrated the computer servers of PRNewswire, Marketwired and Berkshire Hathaway’s (BRK-A) Business Wire, taking press releases and passing along key data to co-conspirators, who then used the insider information to trade stocks, including Dow components such as Boeing (BA), Caterpillar (CAT) and Dupont (DD). Officials say the operation, which ran for five years, netted the participants more than $30 million in illicit profits.
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In a grand jury indictment filed in Newark, New Jersey federal prosecutor Paul Fishman explained the alleged ring often moved quickly to take advantage of what they had:
In order to execute their trades before the Stolen Releases were made public, the Trader Defendants and other co-conspirators sometimes executed trades in very short windows of time between when the Hacker Defendants illegally accessed and shared the Stolen Releases and when the press releases were disseminated to the public by the Victim Newswires, usually shortly after the close of the markets. Frequently, all of this activity occurred on the same day. Thus…the trading data for the Trader Defendants often showed a flurry of trading activity around a Stolen Release just prior to its public release.
Yahoo Finance Tech Reporter Aaron Pressman says it’s not surprising cyber thieves might target these kinds of sites because they are unlikely to have the kinds of security protocols seen in stock exchanges or publicly-traded companies.
“What hackers do is they look for the weakest link in the chain,” he explains. “We’ve heard recently of another scheme where they were sending emails to try to capture inside information from inside companies, from financial companies to pharmaceutical companies. So they’re looking for those weak links.”
And despite today’s indictments, Pressman believes the government is really just playing a game of “whack-a-mole” as law enforcement officials try to battle against online criminals bent on beating the system.
“I don’t think it’s possible to shut these down,” he argues. “That’s why hacking is going to continue to be a problem. You can do preventative measures and secure all the weak links, but you’re not going to be able to search the entire internet and block out all the information hackers are exchanging.”
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