US Charges 3 Chinese Citizens with Hacking into Law Firms for Insider Info

Three Chinese citizens made $4 million in illegal profits after hacking into New York-based law firms for insider information about pending mergers and acquisitions, according to a Justice Department release.

Federal prosecutors in Manhattan on Tuesday unsealed charges against Iat Hong, Bo Zheng and Chin Hung for conspiracy, insider trading, wire fraud and computer intrusion.

From April 2014 through late 2015, the trio allegedly targeted at least seven unnamed law firms that handle M&A transactions, hacking into the networks, servers and emails to find information about deals that hadn’t been publicly announced. The release states they attempted to access law firms more than 100,000 times in 2015, and successfully exfiltrated information from at least two firms.

They then bought into target companies prior to deal announcements and then sold them for about $4 million in profits. Some of the deals included biotech company Intermune, chipmaker Intel and business logistics company Pitney Bowes Inc.

“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,” U.S. Attorney Preet Bharara said in a statement.

Hong, a resident of Macau, was arrested Dec. 25 in Hong Kong and faces pending extradition proceedings. Zheng, a Macau resident, and Hung, a Changsha, China, resident, are not in custody, according to a Reuters report. The three worked for Robotics Company, a startup founded by Zheng to develop robot controller chips and control system solutions.

The U.S. Securities and Exchange Commission also charged the trio with violating the antifraud provisions of the federal securities laws and related rules, and is working to freeze their assets. The SEC's investigation is ongoing.