Hard on the heels of an article posted here earlier today, news comes of another risk to add to the ever-growing list of risks that may or may not be underwritten by cyber insurance. This risk is concisely stated by U.S. Attorney Preet Bharara in the Southern District of New York (Manhattan):
This case of cyber meets securities fraud should serve as a wake-up call for law firms around the world. You are and will be targets of cyberhacking because you have information valuable to would-be criminals.
Mr. Bharara was commenting on an indictment of three citizens of China who allegedly traded on information they obtained from hacking. The trio allegedly hacked "more than 100,000" times (think of that) into several of the most prolific mergers and acquisitions law firms in New York.
The hackers reportedly stole EMails which addressed mergers and acquisitions, used this quintessentially "inside information" to buy stocks in target companies, then sold the stocks after the deals were released and the stock prices went up. The Securities and Exchange Commission reportedly has also filed a "parallel" civil proceeding against the same individuals. Leslie Picker, "Dealbook / 3 Men Made Millions by Hacking Merger Lawyers, U.S. Says" (New York Times Online, posted Tuesday, December 27, 2016).
While the occasion for Mr. Bharara's remarks was an indictment of hackers into a few law firms that specialized in mergers and acquisitions, his remarks on the risk of cyber hacking are not limited to that one, albeit wealthy, practice area.
To paraphrase, most if not all lawyers are and will be targets of cyber hacking because all lawyers have information valuable to would-be criminals.
So, there is the additional potential cyber security risk: Lawyers' confidential online files. Have you, and has your lawyer, invested enough time and effort to prevent hacking and other releases of confidential online information? Or is the security protocol now in place actually an open invitation to hackers to return to your client files, say, "more than 100,000" times?
And if the worst becomes real, will any cyber insurance cover the losses?
Best wishes for a better 2017! Happy New Year in the year to come!
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