[Photo:  Hackers, by Chs87 / WikimediaCommons]

The SEC today charged 3 Chinese traders with trading on hacked nonpublic market-moving information that they stole from 2 prominent NYC-based law firms. The traders earned almost $3 million in illegal profits. The enforcement action marks the first time the SEC has charged hacking into a law firm’s computer network.

Prosecutors didn’t identify the law firms, but The WSJournal reported in March that federal investigators were probing hacks of Cravath Swaine & Moore and Weil Gotshal & Manges, which represent Wall Street banks and Fortune 500 companies in everything from lawsuits to multibillion-dollar merger negotiations.

Iat Hong, Bo Zheng, and Hung Chin allegedly installed malware on the networks of 2 law firms, compromised accounts that enabled access to all email accounts at the firms, and copied and transmitted dozens of gigabytes of emails to remote internet locations.

The SEC charges Hong, Zheng, and Chin with using the stolen confidential information contained in emails – particularly emails of M&A attorneys - to purchase shares in at least 3 public companies ahead of public announcements about entering merger agreements. The trades, which occurred from April 2014 to late 2015, involved shares of: (i) semiconductor company Altera; (ii) e-commerce company Borderfree; and, (iii) pharmaceutical company InterMune.

In a parallel action, the U.S. Attorney’s Office for the Southern District of New York today announced criminal charges.

The SEC investigation continues.