A little-known tale of one of the first times cyber crime happened on the stock market is the tale of the Blanc brothers. What’s even more amazing is it happened in 1834 when there was no internet or computers. But since 1794, France had its national telecommunication lines and network called the semaphore telegraph. It was a network that used a chain of towers that would signal to each other. These towers were placed roughly 8 to 10 kilometers from each other and had rotating arms.
It worked as following, the rotating arms could be set up in various ways to create a code of symbols. They were sent from one tower to another simply by the operator looking at the tower through a telescope. The operator would then repeat the message on the arms of his tower to continuing relaying the message across the network. This would keep going until the message arrived at its destination. It was a system created by Claude Chappe and his brothers as early as 1792. Across France the whole network consisted of over 556 stations, relaying messages across 4,800 kilometers. Generally, this was used for military and national communications only, it enabled communications to travel at over 500 kilometers per hour.
As long as the visibility was there, an operator could send over three symbols in just under a minute. For example, a message could go from Paris to Lille in around nine minutes which is a distance of 200km. And because the network transferred government messages, it was encrypted so the operators would not understand what the symbols meant. A sort of primitive end-to-end encryption.
The Blanc brothers were two bankers who took advantage of the network by hiring a colleague to watch the Paris Stock Exchange and pass information from the big changes to an operator. The operator would then send them the messages to the Blanc brothers in Bordeaux. It meant they knew the Paris stock trends five days before anyone else in the Bordeaux stock market. And we’re able to capitalize on this knowledge by playing in advance.
When they were finally caught after the fraud for two years, authorities realized no law existed to convict them, so the Blanc brothers were completely free.
