(MoneyWatch) When the Dow stock index dropped nearly 150 points earlier this week following a fake Twitter message from the Associated Press, it showed how easily hackers can disrupt financial markets. Indeed, the hoax was the least sophisticated of the many ways they can cause such turmoil.
Shortly after 1 p.m. on Tuesday, a tweet sent out over AP's main account said bombs had gone off at the White House and that President Barack Obama had been hurt. In the few minutes between the bogus tweet and the AP's disclosure that its Twitter feed had been compromised, stocks plummeted. A group identifying itself as The Syrian Electronic Army later claimed responsibility for the fake tweet, although as usual with these online attacks it is difficult to know for sure who was behind the incident.
While the SEA claims to be acting on behalf of the embattled government of Syrian dictator Basher al-Assad, financial disruption of this sort is most likely to be the work of individuals or independent cyber-terrorists than an act of digital war by another government. Yet because the world's economies are so enmeshed, a major disruption in U.S. stock markets or economy is almost certain to harm other nations as well.
Regardless of who initiated it, a successful attack on one of the major stock exchanges could have a huge impact, with potential losses running into the billions of dollars. Stock markets are already under daily attack. Markets are targets for two major reasons, said Mark Kraynak, senior vice president at computer security firm Imperva.
"The first -- and this is purely speculative but scary, with the Dow dropping over 100 points in a short time -- a savvy attacker easily could have made money on the dip," he said. "The second, and more likely, is because they can or for the fame and fun of it."
Financial institutions like the New York Stock Exchange invest heavily in security. But while these defenses must work 100 percent of the time, hackers only need to succeed once to make their mark. "What we're seeing generally is that attackers are motivated and sophisticated, making it possible for them to use a range of different attacks," Kraynak said.
Breaking directly into an exchange is just one way for an attacker to influence stock prices. Create a credible enough piece of fake news, whether negative or positive in its impact on asset prices, and you can move stocks or even an entire index.
The media is the most obvious avenue for such fraud, and not only via a Twitter account. National Public Radio's website was compromised last year, with hackers posting a false story claiming that the late rapper Tupac Shakur was still alive. That attack appeared to be for fun. In 2008, by contrast, Apple's stock dropped 5 percent after a phony report that Steve Jobs had suffered a heart attack was published on the CNN-owned site iReport.
Another way to disrupt markets is by breaking into the email, website or Twitter account of a major financial figure. If someone impersonated Warren Buffet or the CEO of a large corporation and sent out messages with false information, some media outlets would almost certainly report it, at least initially. This is especially dangerous now that the SEC has approved the use of social media as a way for companies to communicate with investors.
The news that gets leaked doesn't have to be false. Fake reports can be easily and quickly verified, but real data, if it's released prematurely or out of context, can be just as damaging or profitable. There are many ways for a determined hacker to get that information, said Rob Rachwald, senior director of research with FireEye, a computer security company.
"Breach a law firm -- law firms obtain legal documents that indicate, for example, future earnings or other statements" that could be leaked to public prematurely, Rachwald said. "Or go after the CFOs who sit on [a company's] financials to get sneak previews of earnings information."
The upshot? While investors increasingly rely on information gleaned from Twitter and the Internet for what to do with their money, they are just now learning how dangerous that reliance can be.