Have M&A data hacks been done to facilitate insider trades?

Mergers and acquisitions can do a lot for a company's bottom line. As we have noted in past blogs, where the facts indicate two businesses working together can perform better and the value of each can be increased, combining forces may make sense.

However, such deals also carry with them inherent risks that, if improperly managed, could leave the parties open to any number of possible legal liabilities. Where publicly traded companies are involved, there is the specter that if details of the trade are leaked before the deal is consummated, it could result in insider trading. 

That could mean a boon for the illegal traders, but it could also lead to a shareholder uprising over loss of value. Properly protecting transactions throughout the whole process is something that requires the attention of attorneys experienced in business law.

These days, the means by which would-be insider traders work their schemes have become a lot more nuanced. As the use of e-documents and email has expanded to facilitate deal making, so has the practice of hacking. As an example, take the case of the group dubbed FIN4.

According to news reports, this group of hackers has been stealing merger and acquisition data from more than 80 companies. They apparently have been operating for more than a year. The purposes of their activities hasn't been clearly identified as yet, but the suspicion is that the group may have been feeding the information to traders or hedge funds looking for an edge and to make money on swings in stock prices that often accompany M&A actions.

Researchers at the security consulting company FireEye Inc. uncovered the activity and have since reported what they know to the FBI. FireEye says the tactics used by FIN4 suggest that the group is made up of people with Wall Street experience. Players apparently got into email accounts of key participants in various deals and then used their Wall Street savvy to get to the right officials and phish for fruitful information.

At this point, there is no word that anyone has been taken to account for the activity.

Source: Bloomberg, "Hackers With Wall Street Savvy Stealing M&A Data," Alan Levin and Michael Riley, Dec. 1, 2014

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