Justice Department Charges Chinese Hackers In Bid To Curtail Cyber-Theft

Dec 20, 2018
Originally published on December 24, 2018 11:35 am

Updated at 2:30 p.m. ET

The Justice Department announced charges Thursday against two alleged hackers suspected of working on the orders of the Chinese government as part what the U.S. alleges is a long-running effort to steal American intellectual property.

The charges were part of a broader move by the Trump administration to push back against what U.S. officials describe as China's relentless drive to steal American business secrets.

The two men, Zhu Hua and Zhang Shilong, are part of a "hacking group" known as Advanced Persistent Threat 10, according to an indictment unsealed in the Southern District of New York.

The two men allegedly were working for a company called Huaying Haitai and in association with China's main intelligence agency, the Ministry of State Security.

The men are charged with conspiracy to commit computer intrusions, conspiracy to commit wire fraud and aggravated identity theft.

Vast scale to alleged thefts

The indictment details alleged cyber-attacks that targeted intellectual property, confidential business and technological information and other data at more than 45 companies in at least a dozen U.S. states and within U.S. government agencies.

The scale of the alleged cyber-theft is huge, from the banking and finance world to medical equipment to oil and gas exploration to aviation and space to the maritime industry.

"We want China to cease its illegal cyber activities," said Deputy Attorney General Rod Rosenstein in announcing the charges.

He urged Beijing to abide by international commitments it has made not to use cyber-attacks to steal secrets. And the United States isn't the only country harmed, Rosenstein said; a dozen countries were hurt by the cyber-theft detailed in the charges unveiled on Thursday.

"America and its many allies know what China is doing," Rosenstein said. "We know why they're doing it. And in some cases, we even know exactly who is sitting at the keyboard perpetrating these crimes in association with the Chinese government."

Rosenstein added that more than 90 percent of the Justice Department's economic espionage cases in the past seven years involve China.

And he said that many of the companies that have allegedly been targeted by Chinese defendants operate in sectors that the official Chinese government policy called "Made In China 2025" listed as targets for strategic development.

FBI Director Christopher Wray also emphasized the scope and scale of China's state-sponsored theft, saying individuals acting at Beijing's behest are "the most active perpetrators of economic espionage."

"While we welcome fair competition, we cannot and will not tolerate illegal hacking, stealing or cheating," Wray said.

The attacks described in the indictment exploited "managed service providers," described as companies that manage IT systems for clients around the world, including governments and businesses.

Compromising those MSPs, the Justice Department leaders said, was like a thief getting access to the master key to an apartment building. The thief not only could access the building, but all the rooms within it, to take what he wished.

Relations between Washington and Beijing already on edge

The U.S. actions could add to already tense relations between Washington and Beijing. The two countries, which boast the No. 1 and No. 2 economies in the world, are in the midst of a bruising trade dispute that has seen both sides slap tariffs on the other.

Justice Department officials said the timing of the indictment was not influenced by any political considerations.

But it may not be viewed that way in Beijing.

The announcement also followed the arrest in Canada of Meng Wanzhou, the chief financial officer of Huawei, one of China's biggest companies and one of the largest cell phone producers in the world.

Canadian authorities arrested Meng at the request of the United States, which alleges she conspired to defraud several banks as part of a scheme to avoid U.S. sanctions on Iran.

The case has added yet another irritant to ties between the U.S. and China.

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The Justice Department announced charges today against two Chinese men who allegedly hacked into dozens of U.S. companies to steal business secrets. Prosecutors say the men were working on behalf of the Chinese government. And NPR justice reporter Ryan Lucas is here with us now to fill in all the details.

Hey, Ryan.


CHANG: So what exactly were these men charged with?

LUCAS: Well, the indictment identifies the two defendants as Zhu Hua and Zhang Shilong. They're both in China, and they face three counts in all, including conspiracy to commit computer intrusions. They are accused of being members of a Chinese hacking group. And what the indictment alleges is that the men hacked into dozens of companies in the U.S. and around the world to steal sensitive business secrets. And they did so, prosecutors say, at the behest of China's Ministry of State Security.

Now, this sort of hacking is a source of enormous concern to U.S. officials. They say that Chinese state-sponsored actors have been hacking into U.S. companies for years - stealing American economic secrets, American intellectual property. We're talking everything from jet engines to engineered rice. Deputy Attorney General Rod Rosenstein today did not mince his words.


ROD ROSENSTEIN: We want China to cease its illegal cyberactivities and honor its commitment to the international community. But the evidence suggests that China may not intend to abide by its promises.

CHANG: Does the indictment say specifically which companies were targeted?

LUCAS: It does not, no. But senior DOJ officials say that the industries targeted run the gamut. So we're talking about banking and finance, biotechnology, health care, mining...

CHANG: Wow, it's all over.

LUCAS: ...And others. It's all across the board. These hackers even got the personal data of some 100,000 U.S. naval personnel.

CHANG: Whoa.

LUCAS: And Rosenstein pointed to something that's really interesting that I've also heard from other officials. And that's that China is very strategic, very targeted in the companies that it hacks. The companies targeted match sectors of the economy that China's official government policy paper lists as sectors for strategic development. Here's how FBI Director Chris Wray put it.


CHRIS WRAY: China's goal, simply put, is to replace the U.S. as the world's leading superpower. And they're using illegal methods to get there.

CHANG: Now, all of this is coming at a time of intense trade tensions with China. What's the back story to all this?

LUCAS: Well, the sort of hacking and theft of intellectual property and plundering of U.S. innovation that is alleged here is part of the intense competition that we're seeing between the U.S. and China as the two largest world powers now. What the U.S. is doing is trying to push back against China's actions. The Obama administration struck an agreement that you may remember back in 2015 with Beijing. And under that, China agreed not to engage in cyberattacks for economic espionage. U.S. officials say that China is not living up to that, and so we're likely to see more indictments like the one we saw today.

CHANG: OK. Before I let you go, I want to turn very quickly to President Trump's nominee for attorney general, William Barr. There's some controversy today about a memo he wrote that shows he's been critical of the Russia investigation. Right?

LUCAS: That's right. This is a memo that Barr wrote this past summer, some months before he was Trump's pick for attorney general. And what Barr does in this memo is criticize special counsel Robert Mueller's investigation. And in particular, he criticizes the idea of investigating the president for possible obstruction of justice. He calls the legal theory behind that, quote, "fatally misconceived." Now, the man who has overseen Mueller's investigation is Deputy Attorney General Rod Rosenstein. And Rosenstein said today that Barr's memo is merely Barr's opinion. He says that Barr was not privy to the facts of the investigation when he wrote the memo. He says the memo has not impacted the investigation. What is certain, though, is that this is likely going to impact Barr's confirmation proceedings.

CHANG: Of course.

LUCAS: Democrats have already expressed concerns about Barr's views on the special counsel. This is only going to add to them.

CHANG: That's NPR's Ryan Lucas.

Thanks, Ryan.

LUCAS: Thank you. Transcript provided by NPR, Copyright NPR.