A Chinese national previously employed as a developer at an American company was indicted on June 14 for allegedly stealing propriety source code with the plan of selling the software to an investor group and delivering it to a Chinese government entity.
According to the indictment unsealed on June 14, Xu Jiaqiang, 30, was employed as a developer at IBM, where he had access to the company's coveted source code used to manage and coordinate large amounts of data across several servers.
Download: Xu Jiaqiang Superseding Indictment
After leaving IBM in May 2014, Xu was in contact with two undercover FBI agents posing as an investor and project manager from a company interested in building out its own big data storage services. In March 2015, Xu sent the agents a sample of his work, which included proprietary information on IBM's clustered file system.
Xu later followed up with an offer to sell the full source code to the investors, which they could then use as a platform for their own systems. That system was up and running by late August.
Unbeknownst to Xu, he loaded the code into a FBI-controlled network.
IBM employees reviewed the code and confirmed it contained proprietary information that only a few employees would have had access to.
The data were closely protected, according to the Justice Department.
The code was kept behind a secure firewall, with access restricted to a small number of IBM employees. Even then, those employees had to make an official request before gaining access.
In December, while meeting with one of the undercover agents at a hotel in White Plains, New York, Xu admitted "in sum and substance" that the software he provided was based on IBM's protected source code, according to investigators. He was arrested that day.
Along with this scheme, Xu also allegedly sought to provide the source code to the National Health and Planning Commission, a governmental body of the People's Republic of China.
Xu is scheduled for arraignment in the Southern District of New York on June 16, where he faces three counts of economic espionage and three counts of theft of trade secrets. The charges carry a total of 75 years in prison if he receives the maximum on all six counts.
"Economic espionage not only harms victim companies that have years or even decades of work stolen, but it also crushes the spirit of innovation and fair play in the global economy," said U.S. Attorney Preet Bharara. "Economic espionage is a serious federal crime, for which my office, the Department of Justice's National Security Division and the FBI will show no tolerance."
The U.S. and China signed an agreement last year to curb the spread of cybercrime and economic espionage. The June 14 indictment comes as officials from both countries meet for the second set of high-level talks to work out details and establish international norms.
Homeland Security Secretary Jeh Johnson and Attorney General Loretta Lynch were initially schedule to participate in these discussions, however the deadly shooting at an Orlando night club on June 12 preempted the trip.
The countries plan to hold a third session in Washington, D.C., later this year.
Aaron Boyd is an awarding-winning journalist currently serving as editor of Federal Times — a Washington, D.C. institution covering federal workforce and contracting for more than 50 years — and Fifth Domain — a news and information hub focused on cybersecurity and cyberwar from a civilian, military and international perspective.
