DoJ announced the arrest of IAT HONG and the unsealing today of a 13-count superseding indictment charging HONG, BO ZHENG, and CHIN HUNG (the ‘Defendants’). The Defendants are charged with devising and carrying out a scheme to enrich themselves by obtaining and trading on material, nonpublic information (‘Inside Information’), exfiltrated from the networks and servers of multiple prominent U.S.-based international law firms with offices in New York, New York (the ‘Victim Law Firms’), which provided advisory services to companies engaged in corporate mergers and acquisitions (‘MA transactions’). The defendants targeted at least seven law firms as well as other entities in an effort to unlawfully obtain valuable confidential and proprietary information. HONG, a resident of Macau, was arrested on these charges on December 25, 2016, in Hong Kong and is now pending extradition proceedings.
As alleged, from April 2014 through late 2015, the Defendants successfully obtained Inside Information from at least two of the Victim Law Firms (the ‘Infiltrated Law Firms’) by causing the networks and servers of these firms to be hacked. Once the Defendants obtained access to the law firms networks, the Defendants targeted email accounts of law firm partners who worked on high-profile MA transactions. After obtaining emails containing Inside Information, the Defendants purchased stock in the target companies of certain transactions, which were expected to, and typically did, increase in value once the transactions were announced. The Defendants purchased shares of at least five publicly-traded companies before public announcements that those companies would be acquired, and sold them after the acquisitions were publicly announced, resulting in profits of over $4 million. In each case, one of the two Infiltrated Law Firms represented either the target or a contemplated or actual acquirer in the transaction. (Source: U.S. Department of Justice)