Three Chinese traders on Tuesday were charged separately by the SEC and U.S. Attorney Preet Bharara in New York with trading on information about potential mergers and acquisitions that was hacked from two law firms.
The three — Iat Hong, Bo Zheng and Chin Hung — gained up to $4 million in illegal profits from the trades in 2014 and 2015, the Securities and Exchange Commission and Mr. Bharara's office said in separate news releases.
Mr. Bharara's office said the three defendants were indicted by a federal grand jury for targeting at least seven law firms, successfully breaching two of them.
Neither the SEC nor Mr. Bharara's office identified the law firms that they claim were attacked.
According to the SEC and Mr. Bharara's office, the three allegedly used the stolen confidential information — contained in e-mails that were obtained through malware they installed on computer networks — to purchase shares in at least three companies ahead of public announcements about merger agreements.
The companies were semiconductor company Altera, acquired by Intel; e-commerce company Borderfree, acquired by Pitney-Bowes; and pharmaceutical firm InterMune, a pharmaceutical company ultimately acquired by Roche Holding.
“As we allege, the defendants' 'hacking to trade' scheme involved numerous levels of deception as they gained broad access to the non-public networks of two law firms, stole confidential information and then used it for substantial personal gain,” Antonia Chion, associate director of the SEC's division of enforcement, said in the SEC news release.
The indictment was filed in U.S. District Court in New York.
The three defendants are in China, and the U.S. attorney's office is seeking their extradition, according to the news release from Mr. Bharara's office.