Theft Empire

Three Chinese accused of hacking law firms, insider trading
By Nate Raymond | NEW YORK

Three Chinese have been criminally charged in the United States with trading on confidential corporate information obtained by hacking into networks and servers of law firms working on mergers, U.S. prosecutors said on Tuesday.
Iat Hong of Macau, Bo Zheng of Changsha, China, and Chin Hung of Macau were charged in an indictment filed in Manhattan federal court with conspiracy, insider trading, wire fraud and computer intrusion.
Prosecutors said the men made more than $4 million by placing trades in at least five company stocks based on inside information from unnamed law firms, including about deals involving Intel Corp and Pitney Bowes Inc.
The men listed themselves in brokerage records as working at information technology companies, the U.S. Securities and Exchange Commission said in a related civil lawsuit.
Hong, 26, was arrested on Sunday in Hong Kong, while Hung, 50, and Zheng, 30, are not in custody, prosecutors said. 

Defense lawyers could not be immediately identified.
The case is the latest U.S. insider trading prosecution to involve hacking, and follows warnings by U.S. officials that law firms could become prime targets for hackers.
"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 in Manhattan said.
Prosecutors said that beginning in April 2014, the trio obtained inside information by hacking two U.S. law firms and targeting the email accounts of law firm partners working on mergers and acquisitions.
Prosecutors did not identify the two law firms, or five others they said the defendants targeted.
But one matched the description of New York-based Cravath, Swaine & Moore LLP, which represented Pitney Bowes in its 2015 acquisition of Borderfree Inc, one of the mergers in question.
The indictment said that by using a law firm employee's credentials, the defendants installed malware on the firm's servers to access emails from lawyers, including a partner responsible for the Pitney deal.
Cravath declined to comment. 

In March, Cravath confirmed discovering a "limited breach" of its systems in 2015.
Prosecutors also accused the defendants of trading on information stolen from a law firm representing Intel on the chipmaker's acquisition of Altera Inc in 2015.
Intel's merger counsel on the deal was New York-based Weil, Gotshal & Manges LLP. 

The law firm declined to comment.
In Beijing, Chinese Foreign Ministry spokeswoman Hua Chunying said she was aware of the reports about the case but knew nothing about it.
The case is U.S. v. Hong et al, U.S. District Court, Southern District of New York, No. 16-cr-360.

Theft Empire

Treasury and Justice officials pushed for economic sanctions on China over cybertheft
By Ellen Nakashima

Obama noted at a news conference this month that the United States has seen “some evidence” that Chinese government hackers have reduced their pilfering of U.S. companies’ intellectual property and sensitive data.
But, he added, they have “not completely eliminated these activities.”
Although some researchers say the hacking activity has plummeted, officials at the Treasury and Justice departments and at the National Security Council have been pushing to impose economic sanctions on Chinese firms that have benefited from past thefts of U.S. firms’ commercial data.
Over the past year, they have advocated the use of a 2015 executive order on cyber-sanctions that would allow the government to sanction individuals and companies that were enriched by material hacked from the computer networks of American businesses.
“It’s about specific justice for specific victims,” said one U.S. official, who like others interviewed requested anonymity to discuss internal deliberations.
A sanctions package that names specific Chinese companies has been ready for more than a year. 

But pro-China senior officials in the State Department and within the National Economic Council have been opposed.

The administration was close to pulling the trigger on the sanctions last year but drew back after Xi Jinping reached an agreement with Obama that his country would not conduct such activity, and would set up a high-level joint dialogue on cybercrime and cooperate in investigations.
Dmitri Alperovitch, co-founder of the cybersecurity firm CrowdStrike, said China’s commercial hacking dropped over the past year after the agreement. 

Others note, however, that the indictments of five Chinese military hackers for economic espionage also played a role in changing China’s behavior.
But Beijing’s cooperation in law enforcement matters has not been optimal, officials said. 

And the Chinese government has not taken action against those who hacked U.S. companies and stole their intellectual property or pricing information.
If the Obama administration were to impose economic sanctions on Chinese companies, that would be a gift to President Donald Trump, said James A. Lewis, a cyber-policy expert at the Center for Strategic and International Studies. 

“It would be a chit he could trade in talks with the Chinese,” he said. 

“He could offer to lift sanctions in exchange for some economic or trade concession.”
At this point, the use of the order against China is highly unlikely, officials said.
“It’s hard to see the administration picking that fight with China with so few days left in the administration,” a second senior official said.
The Trump administration, however, could choose to use it.