If a TBTF Bank Lost Its Quant Code to Chinese Hackers and No One Knew, Would We Still Have a Functioning Market?

Bloomberg has an excellent catch from the HB Gary emails, revealing that Morgan Stanley was one of the 20-200 companies targeted by the Chinese-based Aurora hack in 2009.

Morgan Stanley experienced a “very sensitive” break-in to its network by the same China-based hackers who attacked Google Inc.’s computers more than a year ago, according to e-mails stolen from a cyber-security company working for the bank.

The e-mails from the Sacramento, California-based computer security firm HBGary Inc., which identify the first financial institution targeted in the series of attacks, said the bank considered details of the intrusion a closely guarded secret.

“They were hit hard by the real Aurora attacks (not the crap in the news),” wrote Phil Wallisch, a senior security engineer at HBGary, who said he read an internal Morgan Stanley report detailing the so-called Operation Aurora attacks.

As McAfee made clear when it first announced the hack, the hackers were after the targets’ intellectual property (though note the understanding of the timing of the hack has changed).

Similar to the ATM heist of 2009, Operation Aurora looks to be a coordinated attack on many high profile companies targeting their intellectual property. Like an army of mules withdrawing funds from an ATM, this malware enabled the attackers to quietly suck the crown jewels out of many companies while people were off enjoying their December holidays.

Now, Bloomberg–with backing from an FBI officer and a reminder that Morgan Stanley is the world’s larger mergers and acquisitions adviser–seems to be most concerned about what the hackers learned about impending M&A.

FBI Deputy Assistant Director Steven Chabinsky said that hackers have increasingly targeted information related to mergers and acquisitions, data that can give companies involved an advantage in negotiations.

But the description of the targeted information as IP immediately made me think about quant code, the algorithms that banks use to conduct high frequency trading. When Sergey Aleynikov attempted to sell Goldman Sachs’ high frequency trading code, the Goldman and the government treated it like a capital offense. For good reason, because if another firm got that code, it would be able to game out Goldman’s moves. So how do we know that these hackers didn’t steal MS’ quant code?

In any case, the hack seems to raise real questions about disclosure. Should Morgan Stanley have had to reveal this to its stockholders and potential M&A clients (remember that MS led GM’s IPO last year, though hopefully long enough after this hack for the merger not to be exposed by it). Should MS have had to reveal this–with the potential implications for markets–to Congress? Did it?

I just can’t help but think that the Aurora hackers may well have gotten the same kind of information that Congressional oversight committees have requested from the Fed, but were refused.

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Emptywheel Twitterverse
emptywheel As US prepares to withdraw, ISAF decided to start hiding details on ANSF troop capability. https://t.co/BjsPXBeubI (Reup fr @JimWhiteGNV)
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bmaz @kennwhite So, jesus, I have a string of a gazillion UID characters that shows up on my ATT iPhone. Still no good way to get rid of it?
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emptywheel @JimWhiteGNV I hear that'll ruin the rice cooker. @onekade
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JimWhiteGNV @onekade More like Badassmati rice, amirite? @emptywheel
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emptywheel @onekade If it involves SIGAR or Iranian border crossings, @jimwhitegnv's nerd ass has already been there.
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emptywheel Folks, thanks for SIGAR notice; @JimWhiteGNV already wrote up that ISAF newly classifying deets abt Afghan troops https://t.co/BjsPXBeubI
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emptywheel Wonder who's going to have a hearing on Supercookies first: Jello Jay Rockefeller in his swan song at Commerce? Or @ashk4n's new employer?
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emptywheel RT @JuliaAngwin: And who’s using these hidden undeletable tracking numbers? @Twitter’s mobile ad exchange unit @mopub, for one. http://t.c…
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JimWhiteGNV RT @moispokesman: Afghan pomegranate, the taste is amazing! You better try it to know it!!!!! http://t.co/TFZqHeaOsh
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JimWhiteGNV RT @ColMorrisDavis: War court censors ‘female’ in gender-based prison guard legal argument http://t.co/MPdGK17uQB But "transparency" is in …
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bmaz @SamAdamsComedy @Espngreeny I was 9 yrs old, and same. Of course I could not pitch for squat, but I tried.
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