Cyberattack! Manipulation and Subversion of Financial Markets!

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Old 01-08-2008
Cyberattack! Manipulation and Subversion of Financial Markets!

Tim Bass
Tue, 08 Jan 2008 11:55:09 +0000

In The Top Ten Cybersecurity Threats for*2008*I mentioned one of most critical cybersecurity threats of 2008*will be*the manipulation and subversion of financial markets.
Well, folks in New York*have barely finished cleaning the colorful New Years confetti*off Wall Street and a vivid example of manipulating the market appears in the news.* We have yet to see the second week of January and the cyberattacks are upon us.
Notice how a direct competitor to E*Trade Bank, Citigroup, used the power of cyberspace, rumors and (mis)information to manipulate the market price of* E*Trade (ETFC).* This might have not been such an eyebrow raising event if the rumor (cyberattack) was by a disinterested third party.* The attack was*by a direct competitor with their own subprime balance sheet problems!
On or about November 12, 2006, Citigroup Investment Research analyst Prashant Bhatia, a longtime critic of E*Trade (ETFC), sent E*Trade stocks into a free fall with his cyberattack, [E*Trade] Bankruptcy risk cannot be ruled out.”* This rumor, by a competing financial institution, basically wiped out countless millions of dollars in investor equity in a few short minutes.* Amazing!
Of course, E*Trade is not going bankrupt*any more than Citigroup is going bankrupt, but the information warfare by Citigroup’s Prashant Bhatia continues.* Here is the lastest:
On January 7th, 2008, Bhatia changes his cyberattack slightly*and reiterates his*”prediction” *that E*Trade will not be profitable for at least*three years.* This*statement was quite different than his earlier attack where he “predicted” bankruptcy for a competing E*Trade.****
Is Prashant Bhatia or Citigroup accountable for these “predictions”?** When investor’s are wiped out in seconds*based on a*cyberattack*by a competing financial institution,*who is responsible for these actions and*investor losses?* Or,*are these*attacks*simply “capitalism” and “the free market” where cyberattacks are commonplace and investors are*no more than*pawns in the market battlesphere?
Some on the net*have*said that*Prashant Bhatia’s actions are*not much different than the owner of a competing movie theater, who stands up and yells, FIRE!! FIRE!! FIRE!!** Then,**after he clears the theater, he then yells, RATS!! COCKROACHES!!* POISON POPCORN!!* to insure no one comes back to the movie house.*
To me, this is an amazingly obvious*cyberattack with an obvious*direct*purpose to manipulate the market and damage a competitor.***
How can*this*attack be allowed to happen?
I think anyone can easily see how this is a very serious cybersecurity threat in 2008 and beyond.**Unfortunately,*these*types of attacks will*certainly get worse before it gets better.* Welcome to “the real world”….** In this vividly real*example, an analyst from a competing bank yells FIRE! and basically*subverts the market, causing countless of investors to loss many millions upon millions*of dollars in the blink of an eye.** Wow.
E*Trade was vulnerable (as were other banks) due to subprime issues.* E*Trade Financial*is a critical competitor (and threat) to Citibank.*** This is a textbook cyberattack in today’s world.***
Dr. David Luckham, discussing financial news and complex event processing (CEP) recently asked, How well does Elementizing work?*and reminds us” News Moves Markets.”** He is certainly correct, obviously.
The*cybersecurity issue* that I am*highlighing here is how easy it is for news to be manipulated and, in turn,*subvert markets, as easily observable with Citigroup’s Prashant Bhatia and his commercial cyberattacks against E*Trade Financial and, most importantly,*their investors.
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