On April 23, 2013, the Associated Press twitter account was hacked.
That message was sent to approximately 1.9 million AP followers. It was then immediately retweeted approximately 4,000 times.
This sent the New York Stock Exchange into a temporary $200+ billion nosedive. Automated trading bots recognized key words from information sources deemed legitimate and it was instantly determined that there “could” be a national emergency. History has demonstrated that a perceived national crisis will have a negative impact on the broader markets.
“It was unprecedented in terms of how fast liquidity disappeared and trading activity pegged at extreme levels,” said Eric Hunsader, founder of Nanex. “When you value speed over everything else, you end up with algos that will shoot first and ask questions later, There’s simply no time for them to do any fact-checking.”
Shortly thereafter, traders realized the AP account had been compromised and the whole thing was a hoax based on a bogus tweet. But the damage had already been done. Oddly enough, the Dow Jones Industrial Average ended up 152 points at the close of trading.
Stephen Ward, Director for the Center of Journalism Ethics at the University of Wisconsin-Madison, succinctly echoes my greater concerns in a front page USA Today article. He claimed that a hoax tweet had the potential to do far more than just financial damage.
“It could have had people trampled, real injuries. This is the world we live in now. And in light of this, news organizations have to certainly increase security procedures so that they can’t be hacked easily. … (If it was phishing that led to this), that is not proper security. They’ve got to review the security procedures. We can’t control non-professionals or individuals using social media. But as news organizations, we have to hold the line here.”
Dr. Ward seems cognizant of the wider problem. Even if we install better security procedures and fine tune the rules governing the media, it’s impossible to control the population at-large. It’s just a matter of time before someone with an evil agenda decides to disseminate panic-laden information while a real-world event is in progress. The possibility of a viral blitzkrieg could even outweigh the dangers presented by a concerted hack.
“When you have the ability to get a newsworthy event in 140 characters or less and you can instantly move a market, you know what this means. You’re going to bring out a lot of people who know they can move a market,” said Todd Schoenberger, managing director at LandColt Capital. “How can you regulate it? You really can’t regulate it.”
“The hack attack demonstrates the perilous position in which we find ourselves with social media and technology,” Bart Chilton, a commissioner at the Commodity Futures Trading Commission, said in a commentary for CNBC. “It also may well have been illegal.”
I’m sure there will be thorough investigations by the FBI and the SEC. While it’s comforting to know that they’ll allocate the necessary resources, I would encourage them to parlay what happened into a mandate to conduct hypothetical assessments of other potential real-world hacking scenarios. This would surely lead them to the prospect of an artificially generated stampede. In the aftermath of such an event, or worst case scenario dominipede, government investigations would be of little or no comfort to the actual victims.