Apple's iPhone Fingerprint Scanner Allegedly Hacked: Do Investors Care?

Perhaps the most hyped feature of the iPhone 5S device released last week is its fingerprint-scanning security system. Fueled by that hype, American Internet security experts Nick DePetrillo and Robert Graham decided to sponsor an impromptu competition to see who could crack the phone's scanner and Touch ID app first. The two men each contributed $100 to the contest as prize money and set up a website called the day before the phone's launch. The site invited others to contribute money to the pot. Thanks to a large donation of $10,000 from the micro venture capital firm I/O Capital, the take reached over $13,000.

It didn't take long for a potential victor to surface. Yesterday, a video was posted to by the large and influential German hacking group Chaos Computing Club . It depicted someone accessing an iPhone 5S with a fabricated fingerprint. (Details on the process used can be found here. ) As of now, DePetrillo and Graham are investigating the video further, but they may have found a winner, and that is, of course, very bad news for Apple ( AAPL ).

Apple's fingerprint scanner was probably the most hotly anticipated feature of its new high end phone, the 5S. Along with a powerful A7 chip and 64-bit processor, the biometric scanner is what sets the new iPhone apart from its competitors, particularly from similarly high-end designs by Samsung (OTCMKTS:SSNLF), running Google's ( GOOG ) Android operating system.

In an online post, a spokesperson for the CCC, Frank Rieger said, "We hope that this finally puts to rest the illusions people have about fingerprint biometrics. It is plain stupid to use something that you can't change and that you leave everywhere every day as a security token."

Despite this potential setback (I say potential because the video and the claim from CCC has to be verified), as of the time of this writing, Apple's stock is currently up 4.43% to $488.10 after strong initial sales of the new iPhones: the 5S and 5C sold 9 million units over their first three days of availability, up from the 5 million that the iPhone 5 moved over the same time period. Moreover, 200 million iOS devices were updated to iOS 7, the company's new operating system.

In a statement this morning, Tim Cook said of the new iPhone debut:

Will the fingerprint hack prove a significant detriment to ongoing sales of the 5S? Or will Apple find a way to overcome this news?

One security expert, Charlie Mill, the co-author of the iOs Hacker's Handbook, described the method shown in the video as a "complete break" of the Touch ID security. As he said to Reuters, "It certainly opens up a new possibility for attackers."

We'll be following the story to see how it all plays out.

Follow me on Twitter: @JoshWolonick and @Minyanville

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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