Infamous computer hacker Andrew “Weev” Auernheimer is putting his skill set to use, along with his inside knowledge of hacker activities, to start a new hedge fund. The fund will identify and then short stocks when they believe could be subject to a hacker vulnerability.
Hacker hedge fund: Is new strategy “slimy?” or “white hat?”
When asked in a CNBC interview if his tactic was “slimy,” Auernheimer entered a new argument seldom heard among activist hedge fund managers, a label the nearly 30-year old convicted hacker now officially wears. But is the man known for hacking into AT&T, a conviction that was later vacated, wearing the white hat now?
Auernheimer says he is founding this “Hacker Hedge Fund” because “I think doing the right thing at the end of the day is actually more profitable, there’s better money in it,” Auernheimer quipped. He claims his activism will lead to a public right to know, and expose, corporate insecurity. “I have a moral obligation to inform the public,” he said, and if making a few bucks in the meantime is the side benefit “no harm, no foul” as they say.
What’s slimy are software companies selling out to NSA
What Auernheimer apparently considers slimy are software companies that “sell their software to questionable organizations or the government that uses it to illegally spy on people.”
Consider this from an activist hedge fund standpoint, for a minute. Auernheimer’s fund, if taken one step further, could be the first activist to do more than attack the personal nature of the board of directors. In theory they could short stocks which then suddenly find themselves the victim of an attack. Imagine shorting Target just before their server was hacked, for instance. It’s difficult to determine where to categorize this fund, but it would most likely fall somewhere under the “intimidation” category we exclusively identified for activist hedge fund strategies last week.
What’s the potential to cross the red line?
Will Auernheimer cross this red line? His fund is likely to have legal counsel telling him that knowledge of a planned hacker attack on a company would be considered insider trading. Now if he could only figure out how to get an HFT computer in the middle of insider trading and the rules just might change. But influencing regulators and prosecutors is likely long down the list of his hedge fund building to do list. He is about to engage in the little known and cutthroat industry of raising assets for alternative investments. Auernheimer has likely dealt with some interesting characters in the hacking community. He’s likely to be equally amused with the asset raising, client management and regulatory hoops most hedge fund’s must endure.