Hackers Manipulate Markets in $700 Million Illicit Trading Spree

Criminals are hijacking online brokerage accounts in Japan and using them to drive up penny stocks around the world. The wave of fraudulent trading has reached ¥100 billion ($710 million) since it started in February and shows no signs of cresting.

The scams typically use the hacked accounts to buy thinly traded stocks both domestically and overseas, allowing anyone who has built up a position earlier to cash out at inflated values. In response, some Japanese securities firms have stopped processing buy orders for certain Chinese, US and Japanese stocks.

Eight of the country’s biggest brokers including Rakuten Securities Inc. and SBI Securities Co. have reported unauthorized trading on their platforms. The breaches have exposed Japan as a potential weak point in efforts to safeguard global markets from hackers.

They also threaten to undermine the Japanese government’s push to get more people to invest for their retirement, particularly since some victims say they are baffled as to how their accounts were broken into and the securities companies have so far largely refrained from covering the losses.

A 41-year-old part-time worker, who did not want to be named because of privacy concerns, said her Rakuten Securities account was hacked and used to buy Chinese stocks in a transaction that cost her ¥639,777, or about 12% of her holdings. When she noticed, she contacted Rakuten, which told her to file a police report. However, the police in Aichi prefecture wouldn’t accept a criminal complaint because they said she wasn’t the victim — Rakuten Securities was. She said that Rakuten then told her that it wasn’t at fault and therefore could not help her.