A Melbourne man has been sentenced to five years and nine months imprisonment for insider trading after hacking into the network of a financial publishing firm.
The man in question, Steven Oakes, 42, who had worked previously in IT for BP and for the NSW government was able to hack into the network of Port Phillip Publishing remotely while sitting in his car adjacent to the office. After accessing the system, Oakes was able to read sensitive information including the firm’s buy and sell recommendations before they were published.
According to reports, Oakes made on average 6.5 per cent profit when he sold shares the day after stock recommendations were published.
Oakes told the court that he was able to target with a wifi scanner, that would scan for vulnerabilities inside Port Phillip Publishing’s network, before skimming usernames and passwords from its system and ultimately accessing the system’s most sensitive information.
He also made changes to Port Phillip Publishing’s email system, adding a feature that would see any draft reports emailed to its editors also sent to him.
Using this sensitive information ahead of its publication, Oakes was able to coordinate the buying and selling of stocks in an extremely effective manner; he continued this for a period of four years, between January 2012 and February of 2016.
“Financial service companies need to have adequate cyber resilience,” Anthony Flynn, senior investigator with the Australian Securities and Investments Commission said. “Whether it’s small firms or banks, this case highlights the need to have sufficient safeguards to protect theirs and their clients’ confidential information.”
ASIC lawyer David Jenzen said the inside trading scheme was ultimately uncovered using the regulator’s market surveillance system, which detects suspicious trades. As Jenzen explains, the company was aware of Oakes’ presence in its system up until the regulator contacted them.
“Port Phillip [Publishing] had no idea he was getting this unauthorised access and it was actually not until we were in contact with them that they found out about this.”
Jenzen also confirmed that ASIC is allocating more resources than ever before to tackle cyber-abuse leading to inside trading and other unethical and illegal trading practices. “It’s something we’re looking at very close and it’s now a larger part of what we do- investigating markets-related offences that have a cyber connection,” he said.
Mr Oakes pleaded guilty to 11 charges, with Judge Fox saying Oakes was “motivated by greed for yourself alone.”
“Insider trading is a form of cheating. It has the capacity to undermine the integrity of the market and undermining confidence in the market more generally. It is not a victimless crime,” Fox added.
Amongst a raft of offences Oakes pleaded guilty to, he also admitted to wiping relevant information from his phone and computer. “I would have thought given your IT background,” Judge Fox said, “you would have understood the futility of this.”
The Australian Securities & Investments Commission has released a podcast on the story, which you can access here.