A detective investigating a series of corporate terrorism and blackmail events called The Laughing Man Incident discovers the injection of specialized micro-machines into the task force to spy on them illegally. The detective sends evidence to Togusa just before his own murder. Once Section 9 exposed the government officials to the media, a mysterious hacker called the Laughing Man hacks onto one of the government officials and states he will be returning to defraud them. Section 9 then begins to investigate the Laughing Man incidents.
During the course of their investigation, Section 9 progressivley discovers the background behind the original Laughing Man incident. It identifies the Laughing Man as a computer hacker named Aoi, who discovered an internal memo revealing that the Murai vaccine was more effective than micro-machine therapy at treating a form of sclerosis called cyberbrain sclerosis. Members of the micro-machine industry in Japan and the Japanese government suppressed the memo in order to profit from the costly but less effective micro-machine therapy being developed. Outraged, the hacker kidnapped the CEO of micro-machine corporation Serano Genomics and tried to convince him, at gunpoint, to disclose the ineffectiveness of the therapy on live television. The CEO refused, and the Laughing Man fled the scene. To protect his identity, he simultaneously hacked every electronic device viewing him and replaced his face with a stylized laughing face. The kidnapping and the hacking skill required to make his getaway turned the Laughing Man into a folk hero.
Section 9 also inadvertently discovers evidence that suggests top micro-machine corporations and politicians staged fake corporate terrorism attacks for profit, and used the Laughing Man's trademark stylized face to put the blame on him. Because of these discoveries, Section 9 becomes the target of a public misinformation campaign to discredit it. In addition, extensive efforts seek to eliminate Section 9 members at all costs. Near the end of the series the Japanese government declares Section 9 a rogue organization. To survive, Section 9 members carry out an elaborate deception, leading the Japanese government and military forces to believe Section 9 members have all been killed. Chief Aramaki temporarily disbands Section 9 itself.
The members of Section 9, safely in hiding, disseminate information on the internal memo concerning cyberbrain sclerosis and the truth about the fake Laughing Man incidents. This causes a public scandal, leading to the downfall of the Japanese Prime Minister and his administration, as well as several micro-machine corporations and their CEOs. In the aftermath of the scandal, Section 9 is reinstated to its former position in secret. The Laughing Man himself is offered a position at Section 9 but refuses. The series ends with the members of Section 9 once again settling into their accustomed routines.