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Hacker jailed for insider trading

BIScom Subsection: 
Editorial Staff

It's the stuff that, if it's a TV or film plot, makes one want to shake one's head and wish that fiction writers would make things a little less far fetched; one feels that belief cannot be suspended when the concept is, well, so unbelievable. Prepare to shake your head again - this time asking why you thought it was so improbable because something that you would not believe is already old hat and the first conviction has just been recorded.

IT consultant Steven Oakes sat just outside the offices of financial publisher Port Philip Publishing. The company had a secure WiFi network and Oakes wanted access to it. He determined that the easiest way to gain that access was by using the log-in credentials of workers.

Using a transceiver and dedicated software he identified persons logging onto the WiFi network and intercepted their transmissions which he decrypted and, using those credentials, logged into the system as those persons. The system, itself, remained secure: the security breach happened outside Port Philip's system and the data obtained used to gain apparently lawful access. Although technologically different, one could think that the breach was similar someone looking over an employee's shoulder and reading their ID and password from a post-it note.

But he did not use the accounts to steal money. Instead, on 70 occasions, he accessed the company's stock pick recommendations before they were published. He bought shares in 52 companies in advance of those "buy" recommendations were made public. When the recommendations were published, the share prices usually rose and Oakes sold his purchases at a profit.

Oakes initially obstructed the investigation by the Australian Securities and Investment Commission (ASIC) and destroyed or altered data that ASIC wanted as part of their investigation.

Financial publishing houses are, potentially, a huge weak link in the financial chain. Cases of persons working in financial publishing were one of the reasons for the introduction of tough market abuse laws: tipsters in national newspapers grew rich by buying shares they would recommend in the next day or two. There have been cases of employees in such companies being targeted by criminals trying to obtain information.

Oakes pleaded guilty to unauthorised access to a computer system, insider trading, destroying or altering records demanded by ASIC.

Was sentenced at the Melbourne County Court in respect of 11 charges. The effective jail term is three years with pre-determined parole after 18 months.