Financial Markets and Cyber Security
Many people are worried that the stock market could get hacked. Some believe that hackers could somehow manipulate the markets by gaining access to critical systems. Although, if we have learned anything about hackers or hacker groups, it is that they are methodical and strategic.
It would not be a good strategy by any worthwhile hacker or hacker group to try to take down the stock markets.
Why you ask?
We must think in terms of motive.
If the motive is to crumble a countries economy, like the United States. Then this might be a plausible idea. Although taking down the stock market would have global impacts. Replicating through the world economy and effecting every single nation on the planet. This is a hack that would be comparable to Elliot’s alter ego on the USA Networks hit show Mr. Robot. A great feat indeed, albeit not very plausible unless the hacker is an extreme anarchist. If we look into the past at cybercriminals, these types of hacker profiles are far and few between.
What would be a proper motive?
Here are four we have identified.
Money, Corporate Sabotage, Competitive Market Advantage, Revenge
So, what would be the proper crime and target?
Infiltrating the networks of the major financial institutions and brokerages.
See, there is no reason to go after the markets directly. All that would need to be done is to target the market movers.
After a hacker has gained access to one of these institutions they can then begin to implement one of 4 identified strategies to exploit the system. These are account manipulation, ghosting, implementation of ransomware and predictive trading analysis.
Hack them and you hack the world.
A typical hacker would start small and focus on the 3rd party vendors of these larger financial institutions. Utilizing social media, social engineering tactics and known vulnerabilities within the public domain, a hacker would be able to gather trusted credentials and access the networks of these vendors.
From there these cybercriminals would be able to find backdoors into the larger institutions and begin to setup the strategies for exploitation.
Account manipulation could fall under a variety of topics. The most notable would be changing user account information for payment processing and then scheduling future trades.
An example of this would be if a hacker had accessed your 401k accounts. When was the last time you logged into them?
With the low to mid-level access a hacker could obtain, they could enter an investors account and schedule cash-out trades at certain price points of a stock. This would be after they change the accounts contact and notification information. Next in line would be to change the payout accounts. This way the hacker could cash-out after a trade and send the money just about anywhere. But most likely they would send the money to a cryptocurrency exchange. By purchasing the coin of their choice and immediately transferring it to cold storage locker, the hacker could easily steal millions of dollars before anyone even knew that their accounts were compromised.
If the hacker played this scenario correctly. He would target investors that primarily deal with long to mid-range trades. They would have periods of inactivity between these trades. The typical accounts would not be very diversified and would have a history of large periodic cash-outs.
Ghosting is an illegal action in trading where there is a collective attempt to influence the movement in price of a stock. When the movement happens, the criminals are setup in advance to profit from the movement.
Usually this would involve market makers with enough influence to cause a social hype or a dramatic price movement with one trade. After which, fear and panic set in with the novice traders and the buyoff or selloff occurs.
For the hacker who has infiltrated certain financial institutions and brokerages, this influence can be programmed.
With billions of trades occurring each day, a hacker could easily find accounts with low activity and manipulate the user profile and notifications. From here the hacker would cash out all trades and retain the money in the account for a very short period of time.
Once all the accounts have completed their cash-outs and the money is available. The hacker could implement a simple program to have all those accounts buy or short the stock of their choice. That stock would in turn produce a movement and that movement would be inflated by social hype.
After this action is completed. The hacker walks away from the hack. They no longer care about the accounts that were manipulated and no longer need them. The most likely scenario is that a large short or buy order was placed on a legit account somewhere else in the world. The moment the movement happened, that person made a ton of money. As did many other people in the world who were oblivious to the hack but had orders in with the hopes that the stock would rise or tumble. Either way, it would be completely unconnected to the perpetrator.
Implementation of Ransomware
It cannot be stressed enough how damaging and prevalent ransomware is. Everyday critical facilities are hit with some type of ransomware. If your company does not have the appropriate Disaster Recovery or Cyber Security Monitoring solution in place, you will most likely by paying a ton of money to get your systems unlocked and even more money in the fallout after the disaster.
Although we have not seen much of it to date, financial institutions, brokerage firms, hedge funds, investment firms will all see themselves becoming targets of ransomware in the near future.
The critical juncture where day to day transactions of money are traded, transferred and processed is the grease in the machine for the world economy. For an institution or market mover to lose the ability to manage, monitor or process this platform, the results can be devastating. Not only will it cost them revenue, fines and ransoms. It will also bring about a lack of trust from their clients and investors.
Predictive Trading Analysis
Predictive trading and analysis is a hack I believe we will see come to fruition in the next few months. The execution of this crime is fairly simple and the technology to complete it is already on the market.
If you could know today what the price of Amazon’s (AMZN) stock would be tomorrow, would you put some money down on it?
So let’s think about this for a moment. If I could analyze all the trades a financial institution had in its queue prior to the opening of the market, I would then be able to predict certain movements within the market.
Now let’s take this to an even larger scale. What if we had the perspective from three of the major financial institutions. If a hacker infiltrated their systems and placed a non-intrusive program to relay pre-market trading information. This information is sent to a predictive analytical engine where it is analyzed and then gives the criminal a summary of the new days market movements.
This is a level of insider information that would be worth billions.
Our world has many threats and it is becoming increasingly more apparent that cybercrime is a threat that needs more attention. It is estimated that approximately 68% of companies in the world are not prepared for a cyber-attack and you can include major financial institutions in this statistic. We trust financial institutions with our money. They have strict levels of data compliance and regulations. Although their vendors and suppliers are not required to abide by those policies and regulations. When we look at levels of intent and vulnerability, I can assure you that it is only a matter of time.
This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.
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