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Crime in Hong Kong

Macau hacker Hong Iat, who Hong Kong refused to hand over to the US, threw US$9 million behind insider trading job, SEC court documents allege

Hong Kong rejected a US request to hand over the Guangdong native – the first such rejection since the city signed an extradition deal with Washington in 1998

PUBLISHED : Monday, 02 July, 2018, 7:04am
UPDATED : Monday, 02 July, 2018, 12:21pm

The Macau hacker who Hong Kong refused to hand over to the United States last year speculated US$9 million in an alleged insider trading case, the Post has found.

Hong Iat, whose whereabouts remain unknown along with how he even ended up in Hong Kong custody, also claimed to have HK$5 million (US$541,000) in assets.

The 28-year-old, born in Guangdong province, is wanted in the US for allegedly hacking sensitive information from two New York law firms. But Hong Kong rejected a US request to hand him over after 10 months of negotiations last October – the first such rejection since the city signed an extradition deal with Washington in 1998.

A US court document revealed Hong was held at Hong Kong’s Lai Chi Kok Reception Centre and US prosecutors continued to mail court documents to him three months after his arrest on Christmas Day 2016.

The US State Department’s latest Hong Kong Policy Act report, released in May, disclosed the rejected extradition request. But it did not identify Hong, saying only that a detainee was released into central government custody. A government source later confirmed that the city rejected the US request to turn over Hong, but stressed it was Hong Kong’s own call, amid US claims that the rejection came “at the behest” of the central government.

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Hong was among three people that the US Securities and Exchange Commission (SEC) accused of hacking into the emails of partners at two New York-based law firms in 2014 and 2015, and insider trading. The group allegedly obtained more than 60 gigabytes of data that detailed confidential acquisition information of some listed companies.

The SEC told the New York Southern District Court that the trio, informed by the ill-gotten data, bought shares in at least three companies, and made at least US$3 million when the acquisitions were announced and the stock rose.

The two other defendants were the 53-year-old head of a network security company Hung Chin, who was married to Hong’s mother, and 33-year-old Zheng Bo, Hong’s colleague in an IT company in Zhuhai, Guangdong province.

Their whereabouts are unknown.

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US court documents show the trio spent more than US$9,120,000 on the stocks. The stocks were bought through Bank of China on margin, a high-risk way of buying shares, funded in part by the bank.

About 45 per cent of the total sum came from Hong and his mother Lai Sou-cheng, who is listed as a person of interest for receiving and investing funds. Lai’s US stock account was frozen.

Documents submitted by the SEC revealed Hong himself was a frequent stock trader. Applying to open accounts at Sun Hung Kai Financial’s Macau branch and Bank of China in 2014, Hong claimed he owned HK$3 million to HK$5 million net assets and at least HK$200,000 liquid assets.

In April 2016 he spent 6,059,573 yuan (US$941,000) on four Shanghai-listed shares, on 30 to 40 per cent margin.

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The documents showed Hong was registered as living in a 1,345 sq ft flat in Taipa, Macau, with Lai. The Macau Land and Real Estate Registry showed Lai bought the flat with her husband in 2009 and later mortgaged it for HK$1,870,000.

Shortly before the alleged hack happened in mid-2014, Hong and Hung started a consultancy to “analyse internet breaches and security technology”, operating at the same address.

Two people currently living at the address told the Post on June 6 they were only tenants, and did not know Hong or Lai.

Neighbours only vaguely recalled Hong, and said he rarely showed up.

Another source, who was in contact with Hong before 2016, said Hong sometimes travelled to the US, Macau and Hong Kong.

Calls to Hung’s Hong Kong flat, in Wan Chai, went unanswered. A security guard said the residents there only visited once or twice a year.

The justice departments in both the US and Hong Kong, and the SEC, declined to comment on whether the arrest in Hong Kong came at the request of the US or where Hong was held in custody and released to.