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Hacker starts hedge fund targeting vulnerable companies

An infamous computer hacker has now set his sights on Wall Street, opening a hedge fund that will short companies vulnerable to security breaches.

Andrew Auernheimer, known by his alias Weeve, told CNBC's "Power Lunch" that his fund's "primary strategy is to identify a company that has [information security] liabilities that no one knows about yet."

He would then take a leveraged position, put options on the stock and release the liability information to the public.

Read MoreHow cybersecurity pros really feel about hackers

Auernheimer was accused in 2010 of hacking into AT&T's website and stealing more than 100,000 email addresses and later posting them onto a public site. He was convicted and sentenced to 41 months in prison, but was released after serving just over a year when an appeals court overturned his conviction earlier this month.

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Instead of hacking, Auernheimer's fund, TRO LLC, will "probe the public surface of a company" and watch hackers to see what they're doing. It's a move that the self-described online "troll" calls totally legal.

Noted M&A attorney Frank Aquila called Auernheimer's tactics "slimy," but told CNBC "if he does it in a manner that is otherwise legal, then he will probably be okay."

For Auernheimer, it's about a moral obligation to inform the public.

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"I feel slimy when I sell an exploit to somebody that I know is going to use it to spy on people illegally," he said. "I'd much rather bring it to the public's attention so consumers can make informed decisions."

And he's not worried about finding investors when the fund has its first offering in August.

"People want to support liberty and morality…and it will be profitable for the people involved."

By CNBC's Michelle Fox.

Investigations Inc.: Cyber Espionage

  • When a person enters information on a website, like an email or credit card, it gets stored in that company’s data base. Those web-based forms are a simple tool for users, but they are also another way hackers can exploit a company’s system. Instead of inputting a name into the website, cyber spies can put in a specially crafted text that may cause the database to execute the code instead of simply storing it, Alperovitch said. The result is a “malicious takeover of the system,” he said.

    By attacking business computer networks, hackers are accessing company secrets and confidential strategies and creating huge losses for the overall economy.

  • China is working feverishly to counteract its slowest GDP growth in recent years, and one of the ways it’s doing so, say U.S. officials, is through the theft of American corporate secrets.

  • US businesses are enduring an unprecedented onslaught of cyber invasions from foreign governments, organized crime syndicates, and hacker collectives, all seeking to steal information and disrupt services, cybersecurity experts say.

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