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Style, Summer, 1999 by Jon McKenzie

Hacker Trading

On the morning of April 7, 1999, the stock price of PairGain Technologies Inc. suddenly rose more than 30% amid rumors that the company was being acquired by an Israeli rival, ECI Telecom Ltd. The rumor of a buy-out of PairGain had been in the air for months, but that morning it caught fire on a Yahoo! finance bulletin board (fig. 1). Stacey Lawson, a 32-year-old female IT manager from Knoxville, posted a message about the buy-out along with a link to a Bloomberg News page that announced the story as well as quotations from the CEOs of PairGain and ECI. As rumors are wont to do, the story of the buy-out traveled quickly, accelerated by cutting-edge information technology--there were mass e-mailings via a Web service called Hotmail--and by good old fashioned speculative greed. In a short time, the price of PairGain skyrocketed and over 13 million shares of PairGain were traded that day on NASDAQ, about 700% higher than its daily average.

But something was amiss. Investigators from NASDAQ and the Securities and Exchange Commission (SEC) suspected insider trading--in this case, insider information being leaked in order to dramatically increase the stock's value. The management of PairGain and ECI were contacted, but both denied being involved in any negotiations. For its part, Bloomberg News also denied knowledge of the buy-out, and it was discovered that the report had actually been published on Angelfire.com, a site operated by Lycos. Smelling a hoax, investigators turned to Angelfire and to the Yahoo! bulletin board and started sniffing out the remnants of electronic shenanigans and digital chit-chat. Someone had apparently downloaded graphics from Bloomberg.com and used them to create a bogus Web page reporting the buy-out; next a message was posted on Yahoo! with the link to the bogus news report and mass e-mails were launched through Hotmail.

The FBI was called in, though by then the ploy's plot had become clear: invest in PairGain at one price, start a buy-out rumor using Hotmail and Yahoo!, "substantiate" it with a "news report," all in order to drive up the stock's price, and then make a tidy profit by selling it off. By noon of the same day, news of the hoax had brought PairGain's price back down (though it ended the day up nearly 10%). A few days later, the gig was really up. Following the trail of IP addresses left at the sites of the hacks, FBI agents closed in on Gary Dale Hoke, a 25-year-old, mid-level engineer employed at PairGain's Raleigh, NC, operation. He was arrested and charged with securities fraud. In June, Hoke pleaded guilty. He apparently acted alone.

Hoke's hoax made headlines in both traditional and online media, and morals were quickly drawn up: old tricks can find new outlets--and new suckers--on the Web, and covering your tracks in cyberspace is harder than you might think. But there are other lessons as well. Hoke's stated motive, for instance, was hardly illegal: personal gain, the maximization of profit, is considered a prime mover of stock market speculation. What was illegal were his means: the fraudulent dissemination of securities information. For those of us interested in interactivity--which may be situated at the limen of social and technological

performance--the most pertinent lessons of the PairGain hoax lie in his techniques, namely, the creation of a digital avatar (an alias of Hoke, Stacey Lawson enjoys tennis, dancing and water sports), the mimicry of a report by a leading financial news source ("ECI Telecom and PairGain Technologies, Inc. today jointly announced that they have entered into a definitive agreement"), the rumorological use of bulletin board and e-mail services ("GO PAIR!!!!")--and, perhaps most importantly, in the speed and ease with which all these techniques broke down.

Hoke had applied his knowledge of online communities, telecom companies, and interactive multimedia in a project designed to hack his way to riches. In terms of this objective, he failed miserably, for not only will he do time in prison, his plea bargain commits him to repay millions of dollars to investors who lost money trading PairGain that day. But it appears he did gain something: a place in interactive history. Though the SEC had previously brought charges against online investment sites for the practice of "pumping and dumping" (driving up prices and then unloading stocks), Hoke will likely go down as the first person to commit this brand of security fraud. He may be the world's first hacker trader.

Interhacktivity

In these pages, I will explore a certain combination of interactivity and hacking. Restricting myself to the domain of the World Wide Web, I will examine this combination under the term interhacktivity. What is interhacktivity? To flesh out a response to this question, let's begin by examining its components.

Web interactivity is often approached as a rather intimate exchange between an individual and a Web site, the reciprocal feedback of human and computer behaviors. Even critiques of interactive alienation presuppose its intimacy. And, indeed, today's computer and Web developers seek to make interactivity as individualized as possible. Drawing upon decades of research in human-computer interaction, they strive to create highly personalized interactions and unique online experiences. The entire new media industry--which includes Web developers, software companies, game developers, computer and telecommunication companies--has put into gear a shift called for years ago by Brenda Laurel: to move from engineering interfaces to designing experiences. The result: at decade's end, Web interactivity is more humanistic, more artistic, and much, much more profitable.