The SEC is investigating data breaches at publicly traded biotech companies, according to Reuters, worried that hackers are stealing proprietary information to fuel stock bets.
The commission has approached at least 8 biotechs to ask for details of recent hacks, Reuters' sources say, an out-of-character move for the SEC as it works to get ahead of what could become an insider trading scandal. The effort follows a report from security outfit FireEye describing a group of hackers that breaks into corporate email networks in search of tradable tidbits. Of the group's more than 100 targets, about 60 were biotech companies, FireEye said.
The scam is fairly simple: Hackers target executives, lawyers and consultants using fake Microsoft Outlook login pages, fooling insiders into giving up their credentials. With those usernames and passwords, the intruders then tap into in-house conversations about acquisition plans, clinical data and pending partnerships, buying and selling stock based on the non-public info.
The SEC, which isn't commenting on the investigation, is now trying to better understand how hackers are pulling this off, according to Reuters, working in parallel with the Secret Service.
As is the case for old-fashioned insider trading, biotech is a particularly big target for such crimes because of its inherent volatility. Stock prices in the industry are routinely quadrupled or decimated based on a single press release, and getting that news in advance can be immensely lucrative.
Over the past year, the SEC has prosecuted cases involving Merck ($MRK), AstraZeneca ($AZN), Biogen ($BIIB) and Sangamo Biosciences ($SGMO), charging traders with making millions off of insider tips.
The industry's biggest insider scandal, in which an SAC Capital Advisors trader cozied up to a respected physician to get an early look at data on an Alzheimer's treatment, has cast an enduring shadow over the industry and its relationship with Wall Street. The trader, Mathew Martoma, was convicted of using proprietary information on Elan ($ELN) and Wyeth's then-promising Alzheimer's hopeful bapineuzumab to clear $275 million in profits and averted losses for SAC.
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