[HN Gopher] Six charged in Silicon Valley insider trading ring
___________________________________________________________________
Six charged in Silicon Valley insider trading ring
Author : edward
Score : 161 points
Date : 2021-06-16 17:07 UTC (5 hours ago)
(HTM) web link (www.sec.gov)
(TXT) w3m dump (www.sec.gov)
| arduinomancer wrote:
| > Using sophisticated data analysis
|
| Curious what that entails.
|
| Does the SEC have some automated alerting of suspiciously well
| timed trades?
| cldellow wrote:
| I'm not even sure you need sophisticated data analysis.
|
| The two people who did the biggest trades:
|
| - weren't involved in the finance industry (a school teacher
| and an equipment leasing business)
|
| - had never traded options before
|
| - did the brokerage know-your-client process to get approved
| for options 1-2 weeks before quarterly earnings came out
|
| - profited $884,000 and $175,000
|
| A SQL query looking for people who made > 100K within 2 weeks
| of opening their account would catch these people, and probably
| have relatively few false positives.
| gene91 wrote:
| SEC and FINRA invest a lot in Data Analytics. Go to
| https://technology.finra.org/tech.html and you'll see that they
| use the same tools as the internet industry.
| JKCalhoun wrote:
| I'm still reeling from "six-figure gambling debt".
|
| Man, who _are_ these people?
| Simulacra wrote:
| That is a shockingly high number. I think it's the same people
| in that meme things you realize when you're adult: More people
| do cocaine than you think. Gambling, drugs, OnlyFans,
| eventually debt adds up.
| purple_ferret wrote:
| Davey Scatino
| bosswipe wrote:
| > Using sophisticated data analysis, the SEC was able to uncover
| this insider trading ring
|
| I wonder if there's any ML involved here.
| hkmurakami wrote:
| Today's Matt Levine post on this is a must read
|
| https://www.bloomberg.com/opinion/articles/2021-06-16/don-t-...
| nostrademons wrote:
| Followed a couple links from that and came upon this doozy of a
| story on insider trading tradecraft:
|
| https://archive.is/zYj0R
| wp381640 wrote:
| That column is pretty much always a must-read
| plank_time wrote:
| I guess the way you throw off the algorithms is by having a
| strategy of making large wins and medium losses and only taking
| the delta between the two. Then it would be pretty hard to prove
| insider trading just from the trading records.
| fny wrote:
| > Bannon agreed to pay a civil penalty of $281,497, Rauch agreed
| to pay a civil penalty of $128,230, and Ramaiya agreed to pay a
| civil penalty of $65,780. Sood also consented to the entry of a
| final judgment and agreed to pay a civil penalty of $178,320.
|
| So the SEC claims they found $1.7M in insider trading, and they
| only collect $700K. This assumes the ring didn't do more.
|
| No wonder bigger players do this in size. What a joke.
| wnevets wrote:
| God forbid if you steal a pack of gum, have an oz of weed or
| write a bad check though.
| jmacd wrote:
| I saw the name Rauch and my heart sank!
|
| Thank goodness it didn't go the way I thought it did for a
| second there.
| u678u wrote:
| I'm guessing the penalty is low because they're not
| professionals.
|
| > No wonder bigger players do this in size. What a joke.
|
| Not sure who you mean by that. SEC is all over every major
| player.
| zhengyi13 wrote:
| I don't know who GP might have had in mind, if any specifics,
| but what comes immediately to my mind at least is the whole-
| lotta-smoke that seems to come from the general vicinity of
| Congress (e.g. https://en.wikipedia.org/wiki/2020_congression
| al_insider_tra...).
| JumpCrisscross wrote:
| > _the SEC claims they found $1.7M in insider trading, and they
| only collect $700K_
|
| Nothing has been collected. This is a complaint [1] being put
| to court demanding a jury trial. The SS 21A civil monetary
| penalties are in addition to "further relief as the Court deems
| appropriate," which is legal speak for we don't know how to
| divvy up the gains just yet but want to put specific dollar
| fines in the complaint attached to each defendant. (The SEC
| doesn't put people in jail. The DoJ is conducting its criminal
| investigation, which takes more time for obvious reasons.)
|
| There is a stark difference between financial professionals and
| laypeople in terms of how they judge the risk of getting caught
| for insider trading and the scale of the punishment that comes
| with it.
|
| [1] https://www.sec.gov/litigation/complaints/2021/comp-
| pr2021-1...
| Retric wrote:
| Not quite:
|
| _Wylam has consented to a permanent injunction with civil
| penalties, if any, to be decided later by the court. The SEC's
| litigation against Brown is continuing.
|
| In parallel proceedings, the U.S. Attorney's Office for the
| Northern District of California today announced related
| criminal charges against Brown, Wylam, and Sood._
| vmception wrote:
| They avoided losses and only made some gains
|
| SEC went after the new money
| jwineinger wrote:
| IANAL, but I assume these penalties be on top of the seizure of
| the illicit gains. If not, I completely agree with your
| sentiment.
| paulpauper wrote:
| If guilty, it's a joke that they only have to pay a penalty
| instead of going to jail. It means it's rational for everyone
| to try insider trading at least once, knowing that if you fail
| the worst that can hapepn is you lose your profits.
| pmoriarty wrote:
| Even if they did go to jail they'd likely get a short stint
| at a minimum security country club.
|
| Meanwhile someone stealing a pack of chewing gum from a
| convenience store might get shot, and someone stealing a $500
| TV could wind up serving hard time in a prison where they
| might get raped, tortured, or murdered.
| onemoresoop wrote:
| That's the sad truth, these laws were written with a
| dedication for the white collar and the rich. We will never
| get better as a nation if we don't don't address these issues
| first. Or the alternative is to wait for the house of cards
| to collapse and start over.
| outworlder wrote:
| That's all done on purpose.
|
| https://www.youtube.com/watch?v=rStL7niR7gs
| ascagnel_ wrote:
| As other commenters have noted, the SEC doesn't have the
| power to bring criminal complaints; however, they do
| frequently refer such cases to the DoJ, which is in the
| process of bringing criminal complaints against three of the
| conspirators.
| akomtu wrote:
| That's some ultrasmall fish right there. Just weeks ago
| Pelosi's husband made a few millions off timely bought MSFT
| call options, right before Pelosi gave MS a gov contract. In
| their case is very legal because high rank gov figures are
| exempt from the insider trading law.
| gamblor956 wrote:
| In 2020, SCOTUS decided to limit the SEC's ability to impose
| disgorgement of profits sanctions, see Liu v SEC.
| https://www.supremecourt.gov/opinions/19pdf/18-1501_8n5a.pdf.
|
| The rationale behind the decision was that disgorgement imposed
| joint and several liability rather than individual liabiity,
| and that disgorgement didn't take into account business
| expenses incurred in acquiring the illegally acquired income...
|
| So now, the SEC has to determine disgorgement sanctions on a
| per-defendant basis, rather than assessing it as a single joint
| amount and making the wrong-doers go after each other for
| reimbursements.
|
| Note though that the $700k are just the fines, not the
| disgorgement sanction, which will presumably be issued soon.
| (The $700k penalties are not treated as deductible expenses, so
| they're effectively on top of whatever disgorgement is
| ordered.)
| anonygler wrote:
| $1.7m can't even buy a house.
|
| This is nothing compared to the ubiquitous congressional insider
| trading that goes on.
| atatatat wrote:
| lol...you should move.
| Karsteski wrote:
| > $1.7m can't even buy a house.
|
| I really dislike when people make such obviously inane
| statements like this...
| jb775 wrote:
| > Using sophisticated data analysis, the SEC was able to uncover
| this insider trading ring and hold each of its participants
| accountable
|
| Anyone know details about the analysis they do? I'm assuming some
| sort of scan that notices when multiple people in the same
| geographic area and/or are publicly connected in some way (i.e.
| are fb friends) simultaneously place massive stock market orders
| on the same security.
| endisneigh wrote:
| White collar crimes are barely punished - what a joke.
|
| Insider trading isn't larceny, but for the sake of conversation
| let's say it was - 1 million in insider trading would be like
| 4000 counts of grand larceny, each of which carry a max fine of
| 25K each.
|
| If people were actually fined 100 million for 1 million of
| insider trading I bet you it'd stop happening.
|
| For comparison $250 or more stolen is grand larceny and has a max
| fine of 25K and/or 5 years in state prison.
| WalterBright wrote:
| > I bet you it'd stop happening
|
| You'd lose that bet. The death penalty didn't stop
| pickpocketing, or any other crimes, for that matter.
|
| People just don't work like that. Constantly ratcheting up the
| penalties starts moving into medieval territory rather quickly.
| endisneigh wrote:
| There's little connection between violent and non-violent
| crimes other than them both being crimes. I didn't make any
| claim about violent crimes so I'm not sure why you even
| mentioned the death penalty.
|
| The reality is, if you see these articles, average the
| restitution and see that in general you only pay 50% of what
| you illegally gained, there's little deterrence.
| stonemetal12 wrote:
| Who said anything about violent crimes? He brought up that
| in Victorian England pickpocketing (a non violent crime)
| carried the death penalty. Even with the ultimate
| punishment pickpocketing still happened.
| endisneigh wrote:
| This is misleading because at the same time hundreds of
| other types of crimes, violent and non-violent could also
| result in the death penalty.
|
| Not to mention that was centuries ago and circumstances
| were very different. What punishment has completely
| stopped crime? No punishment can completely stop a crime
| from occurring, but the problem with insider trading is
| that the punishment doesn't even get back what was taken,
| so in a way you're rewarded, not punished.
| mgkimsal wrote:
| > The death penalty didn't stop ...
|
| Are you sure? How would you be sure? If there's even a few
| people who've come close to committing a crime, then
| considered the punishment (prison/execution), then decided
| against the crime... isn't that "stopping" it?
| WalterBright wrote:
| > Are you sure?
|
| Since people kept getting hung for pickpocketing, the
| thread obviously failed to deter them.
|
| > isn't that "stopping" it?
|
| Reduce it, maybe, but not stopping it.
| neolog wrote:
| > getting hung for pickpocketing
|
| When/where did this happen?
| WalterBright wrote:
| https://academic.oup.com/aler/article-
| abstract/4/2/295/25144...
|
| https://en.wikipedia.org/wiki/Pickpocketing#Prosecution
|
| All you gotta do is google "hung for pickpocketing".
| WalterBright wrote:
| I find human psychology interesting, like Cialdini's book
| on persuasion. It seems that people are generally bad at
| making rational risk/reward decisions, even well-educated
| ones. (This explains the popularity of lotteries, for
| example.)
|
| Another way it's been put is people don't do fractions.
| They do not distinguish very well getting $10 as a reward
| vs getting $100. The same with gifts not being appreciated
| in proportion to the value of them - summed up in the
| phrase "it's the thought that counts."
|
| I expect it's pretty much the same for penalties. I
| seriously doubt, for example, if a 1 year prison sentence
| does not deter, 5 years would.
| paulpauper wrote:
| You have to consider the counterfactual in which there is no
| deterrent. Just because it doesn't deter all doesn't make it
| useless.
| WalterBright wrote:
| I was responding to the word "stopping" the crime, which
| means all, and was clearly the intent of the post.
| kyleblarson wrote:
| Have you been to a Walgreens in SF lately?
| endisneigh wrote:
| No, but I know what you're referring to and that's a great
| example and is my point - see what happens when you don't
| punish people for clear criminal activity?
| paulpauper wrote:
| White collar crime can be punished very severely if it agaisnt
| individuals. Wire and mail fraud carry stiff penalties. Insider
| trading is somewhat different becase it's more about being it
| being unfair than theft or exploitation of another person or
| company. It is somewhere in the grey area of a victim vs.
| vicmtimless crime.
| JumpCrisscross wrote:
| > _Insider trading is somewhat different becase it 's more
| about being it being unfair than theft or exploitation of
| another person of company_
|
| Unlike wire or mail fraud, there is very little statute to
| stand on [1]. It's mostly common law, which makes the
| prosecute-or-not decision more challenging.
|
| [1] https://en.wikipedia.org/wiki/Insider_trading#United_Stat
| es_...
| u678u wrote:
| There is no way a first time offender who steals $250 would get
| 5 years.
| whywhywhywhy wrote:
| >White collar crimes are barely punished - what a joke.
|
| and not punished at all if you're a politician
| drstewart wrote:
| >If people were actually fined 100 million for 1 million of
| insider trading I bet you it'd stop happening.
|
| >For comparison $250 or more stolen is grand larceny and has a
| max fine of 25K and/or 5 years in state prison.
|
| And as we all know, there's no more grand larceny
| endisneigh wrote:
| Larceny sentencing is also incredibly lenient in practice.
| This month an Erie County bookkeeper stole 90K from her
| clients and only had to pay 50K in restitution.
|
| My general point is that white collar criminals are hardly
| punished in practice - not that insider trading should be
| treated as larceny. (Because as I pointed out the sentencing
| is generally light anyway)
| dcolkitt wrote:
| But insider trading isn't comparable to larceny whatsoever.
| There is no definitive victim. Yes, in some sense the market is
| "less fair". But the purpose of insider trading law isn't to
| create a level playing field. It's perfectly legal for a well-
| funded hedge fund to fly helicopters over an oil refinery with
| infrared cameras, so they can know ahead before a public
| announcement how much revenue the company is doing.
|
| Rather, all insider trading requires the breach of fiduciary
| duty somewhere in the chain. The "victim" aren't mom and pop
| investors, but the company itself. The idea being that the
| insider who leaks the information is misappropriating his
| fiduciary duty in a way that's not in the direct interest of
| the company.
|
| But in this case the damage to the company is far less than the
| amount of profits the perpetrator gains. Ask yourself, where if
| you owned a company would you rather have $100 million in cash
| embezzled or have an employee make $100 million off well-timed
| stock trades with unrelated third parties?
|
| The damage to the victim only occurs in the sense that adverse
| selection in the form of insider trading dampens liquidity in
| the secondary market for company's shares. Theoretically this
| decrease in liquidity should hurt the company's valuation by
| making shares trade at an illiquidity discount.
|
| In practice, given how extremely liquid and efficient modern
| stock markets are, the impact of a few million in insider
| trading is a rounding error. The vast majority of HFTs and stat
| arb funds that provide liquidity don't hold anywhere long
| enough to where insider trading would make a significant
| difference. Most stocks trade thick at a minimum penny tick
| anyway. (Logically we should only prosecute insider trading
| when stocks are priced over $100.) And the evidence is scant
| that less liquid stocks even trade at a discount, after
| controlling for size and industry.
|
| If we're actually punishing crime based on the damage to the
| victim, then insider trading is almost certainly only pennies
| on the headline number.
| nverno wrote:
| It's more comparable to people taking a shortcut down a
| switchback or through a garden. If a few people do it, no big
| deal, if everyone does it the whole thing falls apart. When I
| hear about insider trading I don't care one way or the other
| about the people who did it- but I do lose some faith in the
| market.
| fallingknife wrote:
| Given that markets are supposed to be information
| aggregators, it would actually be fairer if insider trading
| was allowed. Of course, as with all things, the profit would
| be much less if it were.
| endisneigh wrote:
| My point isn't insider trading in particular but white collar
| crime in general. Even with your example, why not just make
| insider trading legal then, if there is no victim per se?
| Presumably the entire reason it's illegal, in addition to
| what you said, is because the existence of insiders trading
| would make the entire stock market itself no longer something
| where laypeople can confidently say is fair in the sense that
| risk-adjusted publicly-informed trades are optimal.
| Presumably said laypeople would exit the stock market after
| losing confident of it, resulting is less liquidity.
|
| It's like pump and dumps, where the dumps aren't technically
| making victims of anyone as it's not like they've necessarily
| realized any loses. Regardless, money is being extracted from
| the so-called victims one way or another.
|
| in any case, I do agree with your point.
| sithlord wrote:
| Part of the challenge of fining someone is, to fine them in
| such a way that it is painful, and achievable. Fining someone
| 100million for 1 million in trading would be a punishment that
| no one would be able to pay back. Also, would just immediately
| invoke a chapter 13 bankruptcy, which I think, would discharge
| these. So basically you would just be issuing public bankruptcy
| with such extreme amounts.
| endisneigh wrote:
| fraud penalties are not dischargeable. I'm not sure if this
| sort of penalty is a "fraud penalty," but you could structure
| a fine where it's with you for life.
| xxpor wrote:
| The real penalty is having a federal felony on your record.
|
| Good luck ever getting a white collar job ever again.
|
| Research has shown that (especially) for non-violent crimes,
| the real deterrent is getting caught at all, not the amount of
| punishment.
| brianwawok wrote:
| Right. But if someone has total assets of say 500k... whats the
| difference of a 1 million or a 100 million dollar fine? You
| literally cannot collect either before the person dies / moves
| to Mexico.
| Sr_developer wrote:
| 1 MM earned in an inside trading? That should be in the position
| number 2340 in last year alone. Glad to see the SEC has their
| priorities straight.
| mrtweetyhack wrote:
| The whole stock market is a giant scam
| ffggvv wrote:
| glad the sec spends all its time on 6 randos rather than meme
| stocks, scam chinese education companies, nft/crypto, scam spacs,
| tesla, etc...
|
| definitely have their priorities right
| math-dev wrote:
| SEC is clearly corrupt...which is a sad reflection of current
| affairs
| BeFlatXIII wrote:
| The stock market should be an honest unregulated casino. Don't
| invest if you can't afford to lose it all should be the name of
| the game.
| wpietri wrote:
| It really shouldn't.
|
| At a societal level, the point of having a stock market at
| all is to increase the amount of investment capital
| available. An unregulated market where people are at
| significant risk of big losses due to crime, fraud, etc is
| one that will not attract nearly as much capital. Less
| investment capital means less growth and a poorer society.
|
| As proof that regulation is valuable, look at all of the
| foreign companies that list on the US's highly regulated
| markets. They are willing to meet US transparency and
| accountability standards because that's how they get lots of
| cheap capital. In other words, the marketplace of
| marketplaces proves the value of highly regulated public
| markets.
| BeFlatXIII wrote:
| Fair point on the marketplace of marketplaces. Using
| taxpayer dollars and prisons to enforce a transparent and
| accountable market still rubs me the wrong way. Outright
| fraud (eg. a dishonest broker pocketing the $100 instead of
| purchasing the stock for his client), I have no problems
| prosecuting with the full force of the government. It's the
| rules that provide an illusion of being something other
| than buyer beware that I chafe at the idea of government
| intervention.
| williesleg wrote:
| Where's Pelosi?
| underseacables wrote:
| It's amazing the SEC is able to find the stuff out. It's like
| what happen with Josh Chassion at Facebook. Eventually leaking
| confidential data is going to get you in trouble, and maybe jail,
| but people still do it.
| asah wrote:
| This is how the SEC spends its resources? This is considered
| newsworthy? $2M is considered material in 2021?
|
| If they'd been in charge of the WW2 military, instead of Omaha
| Beach, we'd have a press release about one random dead Nazi.
| renewiltord wrote:
| The SEC has a habit of going after all sorts of small fry. My
| favourite is when they went after this moron who made $3100 off
| call options by performing this elaborate scam to make it seem
| like Fitbit was being acquired.
|
| The guy is a class A dummkopf since he performed all this
| easily traceable nonsense for a miserable $3100. But it's still
| only $3100 hahaha. The only thing the press release is good for
| is for entertainment.
|
| https://www.sec.gov/news/press-release/2017-107
| throwaway789256 wrote:
| I agree with this. The SEC cracks down on amateur inside-
| traders, because the professionals no how to cover their
| tracks: they have the resources to fight it in court; and the
| smart ones hire the SEC staff via the revolving door.
|
| This case is hilarious, and for that I applaud the SEC, but
| it's also theater.
| wpietri wrote:
| You seem to be implying this is the only thing they have done,
| which is odd.
|
| I think they should go after big fish of course. But there's
| also value in going after the littler fish. You don't want
| people thinking they can get away with insider trading if they
| just keep their crimes under the big-fish threshold. After all,
| there are a lot more little fish out there, and most serious
| criminals have a long pattern of escalation. It's valuable to
| keep people off the path entirely.
| jb775 wrote:
| The SEC is the HR department of hedge funds. (i.e. it exists to
| protect hedge fund managers)
|
| There's systemic corruption at the highest levels, but the SEC
| decides to go after a handful of little guys. The next French
| Revolution is a ticking time-bomb.
| moron4hire wrote:
| So what was their mistake? Not including any US senators?
| jessaustin wrote:
| They didn't even have any company executives. The highest
| ranking manager was something called a "revenue recognition
| manager". Dude should have known that insider trading
| regulations are how chief executives punish defectors from
| their ongoing conspiracy against the investing public.
| omarhaneef wrote:
| Covered in Matt Levine today and highlights some details:
|
| https://www.bloomberg.com/opinion/articles/2021-06-16/don-t-...
|
| Such as:
|
| Shortly after seeing the screenshot of Wylam's account on July
| 28, Brown called Wylam on the telephone. During the call, Wylam
| explained how he made such large profits purchasing Infinera put
| options before the July 27 announcement. Brown "flipped out"
| because, in his view, the massive size of Wylam's trades and
| profits raised an "obvious red flag."
| tw04 wrote:
| https://archive.is/Y6H89
| throwaway0a5e wrote:
| > Brown ... repeatedly tipped ... to his best friend Wylam ...
| Wylam ... traded on this information and also tipped Sood .. Sood
| traded on this information and tipped his three friends also
| illegally traded on the information.
|
| (edited for brevity)
|
| So it sounds like Brown texted his bestie something he shouldn't
| have. Bestie then passed it on to people who made lot of money on
| it. The SEC, through some combination of SQL select statements
| and creative greps managed to nab the bigger idiots and follow
| them back to the source. Everyone who obviously violated the law
| by trading on info they shouldn't have has settled and the SEC is
| still trying to nail Brown.
|
| Since Brown didn't trade I fail to see where he violated the law.
| Contractual obligations with his employer maybe. Regulatory
| requirements maybe. But you generally need to trade or have
| reason to suspect that someone will trade in order to insider
| trade.
|
| Edit: by "the law" I mean the subsection of 10b that the SEC
| release implies the whole crew violated. Not some unrelated
| regulatory law.
| [deleted]
| bobbylarrybobby wrote:
| > Since Brown didn't trade I fail to see where he violated the
| law
|
| This article suggests that he may have engaged in conspiracy to
| commit securities fraud. https://www.latimes.com/business/la-
| fi-supreme-court-insider...
| throwaway0a5e wrote:
| That article seems to be talking about Wylan, not Brown.
|
| >$1.5 million in stock profits by _trading on confidential
| tips that originated from his brother-in-law,_ an investment
| banker in California.
|
| Brown may have violated some minor regulatory laws depending
| on the specific details of his employment but you generally
| need to trade, benefit or have reason to think trading is
| happening on your info in order to get slapped for insider
| trading.
| johntb86 wrote:
| The SEC complaint mentions this:
|
| > On August 5, 2016, Brown--whose tips enabled his friend,
| Wylam, to make nearly one million dollars--texted his then-
| girlfriend to inform her that he was going to Wylam's house to,
| among other things, "talk to him about $." One week later, on
| or around August 12, Brown took a photograph of numerous one
| hundred dollar bills spread across his bathroom sink.
|
| > On or about October 10, 2016, Wylam took Brown to a San
| Francisco Giants playoff game. Wylam bought both tickets--for
| seats only a few feet from the field--and paid more than $2,500
| for each ticket. Brown understood that Wylam bought the
| tickets, at least in part, to thank Brown for providing inside
| information about Infinera.
| throwaway0a5e wrote:
| That makes much more sense. Where did you find the full text
| of the facts the government alleges?
| wp381640 wrote:
| > Nathaniel Brown, [..] repeatedly tipped Infinera's unannounced
| quarterly earnings and financial performance to his best friend,
| Benjamin Wylam
|
| > Wylam, [..] and also tipped Naveen Sood
|
| > Sood allegedly traded on this information and tipped his three
| friends Marcus Bannon, Matthew Rauch, and Naresh Ramaiya
|
| It's less a ring and more a tree
|
| One of the issues with leaking the info - you have no control
| over what is done with it and who acts on it, and it all
| potentially leads back to you
|
| There was a case in Australia where a gov insider was leaking
| government data. He thought he had a partnership with a co-
| conspirator where they would make low-tens-of-thousands
|
| He only found out after his arrest that his co-conspirator who
| was placing the trades was making millions - which is what got
| them noticed (he was one of the largest individual currency
| traders in the country - and never missed)
| dheera wrote:
| Why don't we apply Darwinism to the financial world? The
| fittest survive. If you can make friends with people who have
| insider info, you should be rewarded with your networking
| prowess. It's quite an underrated skill. That's how startup
| investing works anyway.
|
| Separately, announce earnings with some injected noise. Keep
| announcing corrections in the following several days so that it
| eventually converges to the correct value. That would be fun!
| I'd absolutely _love_ to see the Wall Street suit-and-tie
| hedgehog fund people writhing in anguish while the retail
| investors don 't take a shit.
| umanwizard wrote:
| > If you can make friends with people who have insider info,
| you should be rewarded with your networking prowess.
|
| Why? How does rewarding people for this serve any useful
| social or economic purpose?
| hervature wrote:
| Your other comments show that you don't understand three
| concepts when it comes to insider: 1) who an insider is 2)
| what information is privileged and 3) why is it bad.
|
| 1) Many jurisdictions have specific people (officers and
| major owners) designated. The US is fairly unique in that an
| insider is someone who trade on material non-public
| information that violates trust. This is what allows for
| these friends of low level marketing/accounting people to be
| charged. Overhearing something doesn't put you in a position
| of trust. Being sent an email accidentally and being notified
| that you can't trade on it is something else.
|
| 2) Material non-public information means information that has
| not been publicized and that will definitely impact the price
| of the stock. People "trash talking" their coworkers is not
| material because you have no way of knowing if that is their
| sentiment or if the company is actually falling apart.
| Someone saying "We are getting rid of our entire engineering
| department because I don't like them. Look here is all the
| legal paperwork." is something completely different.
|
| 3) Insider trading is bad because it erodes the trust of
| outside investors. As an outsider, you want the confidence
| that insiders aren't going to get the better end of the deal
| always. That in the event of something bad happening, the
| insiders don't get to bail first. Without outside investors,
| there is no stock market.
| aeternum wrote:
| Quarterly earnings is pretty antiquated anyway. Perhaps
| public companies should just report continuous / daily
| earnings via automated accounting software.
|
| This should make it harder to hide accounting fraud and
| improve transparency and market fairness.
| dheera wrote:
| Perhaps. But why do we actually care about market fairness?
|
| I care that companies get shit done. I want to see electric
| cars, cancer cures, solar power, and vaccines. I don't care
| that the markets are fair. If an unfair market means I get
| those things faster I'm all for it.
|
| FWIW I get cheaper strawberries than most people because
| I'm good at bargaining. Markets aren't supposed to be fair,
| they're supposed to factor in these kind of soft skills.
| haswell wrote:
| > _But why do we actually care about market fairness?_
|
| I'm having a hard time understanding why you believe this
| is even a question, but I'm trying...
|
| Let me ask you a different question: should the CEO of a
| company who knows about a major upcoming change (positive
| or negative) be allowed to trade on that information?
| After all, based on your arguments so far "they should be
| rewarded for rising the the position of CEO".
|
| Do you not see a fundamental issue with a system that
| _guarantees_ unfairness? If I 'm allowed to trade on
| insider info, and everyone else trading knows that, can
| you imagine the downstream consequences? e.g. every time
| I trade, the entire market will now react, because the
| very fact that I'm trading now might indicate something
| about the fundamentals of the stock.
|
| > _Markets aren 't supposed to be fair, they're supposed
| to factor in these kind of soft skills._
|
| What makes you believe/conclude this? Fairness in markets
| doesn't mean we all pay the same price, nor do "soft
| skills" really play into modern day stock trading.
|
| Buying cheap strawberries is a cute analogy, but is an
| apples/oranges comparison, and one involves a consumable
| product, while the other involves buying a stake in a
| company based on information that's supposed to be
| available to everyone else interested in buying a stake
| in the company.
|
| _You_ may not believe fairness is needed, but that doesn
| 't change that those are the rules we operate under, and
| most participants in the stock market would fundamentally
| disagree with you.
| caymanjim wrote:
| Is that not what happened? These idiots sucked at insider
| trading and got caught. The more fit insider traders don't
| get caught.
|
| Lying to the public and your investors as some kind of game
| to "stick it to the man" is not fun, it's obscene (and
| thankfully criminal). These "retail investors" you defend are
| morons and gamblers who are leading a flock of other morons
| into bankruptcy. You should be rooting for them to get
| screwed, not people who play by the rules.
| dheera wrote:
| I don't condone lying, but if you have access to inside
| information why can't you use it?
|
| It's not like my brain can differentiate anyway. If I find
| security bugs in some company's git repo is that insider
| info? The code was public. I should be rewarded for my
| ability to read code. Those who can't read code are less
| fit to be investors.
|
| If I overhear company X employees talking trash on a public
| hiking trail near their office is that insider info? I
| actually went hiking, I have a higher probability of
| overhearing insider conversations, I should be rewarded for
| putting myself out there, doing the legwork, and not
| sitting in an armchair at home expecting people to feed
| information to me.
| Armisael16 wrote:
| Neither of those would be considered insider trading in
| the US.
| dheera wrote:
| Okay so now let's take person A and person B.
|
| A is super friendly. B is an asshole.
|
| A and B both indepedently go solo hiking to the same
| park.
|
| A ends up making some friends with some company X
| employees on the trail, hikes with them for part of the
| trail, and hears inside info, and then they depart ways.
|
| B is an asshole and so those people don't want to talk to
| B. B makes no friends, hikes alone the whole time, and
| therefore gets no inside info.
|
| A should be rewarded by the markets for their people
| skills, no?
| jiofih wrote:
| The employees in that scenario are sharing insider
| information, and are all committing a crime.
|
| Whatever you hear from them and is probably non-public
| info is also illegal to trade on.
|
| I mean, what exactly do you expect to happen if this is
| allowed? Put everyone who works on finance and the
| executives under 24/7 surveillance? Pay them ransom for
| not sharing their employer's data? It would simply be an
| institutionalized racket.
| clipradiowallet wrote:
| > I don't condone lying, but if you have access to inside
| information why can't you use it?
|
| short answer: the SEC says so.
|
| > If I find security bugs in some company's git repo is
| that insider info? The code was public.
|
| This is OK! If the code is public, then nothing you learn
| from it is non-public information.
|
| > If I overhear company X employees talking trash on a
| public hiking trail near their office is that insider
| info?
|
| This is trickier. It all boils down to whether you knew
| the people talking were insiders. Likely some other
| factors here I'm ignorant of, but to sum up... "it's
| complicated".
| wsinks wrote:
| I don't think that's classified as insider information.
|
| Insider information is "details about a company's plans
| or finances that are not yet available to the
| shareholders".
|
| If you overhear employees talking and you have no
| relation to them except you're in proximity, that's
| typically not insider info.
|
| https://www.investopedia.com/terms/i/insiderinformation.a
| sp
| mdoms wrote:
| There's an incredibly good 7-part podcast on the Australian
| case you're talking about, if anyone's interested. It's called
| The Sure Thing.
|
| https://www.afr.com/podcast/the-sure-thing
| tayloramurphy wrote:
| Thank you for sharing this! I'm going to add it to my
| listening queue.
| tw600040 wrote:
| For anything worth securing we have security engineered into it,
| like passwords, encryption what not. But for insider trading we
| are just supposed to assume that the players play right without
| any checks or balances? I don't think just the SEC is sufficient
| to prevent this.
| tedunangst wrote:
| How would you go about adding DRM to insider information to
| prevent trading on it?
| [deleted]
| elliekelly wrote:
| I was on a call last week about the SEC's changing priorities
| under Chairperson Gensler and the consensus among all of the
| attorneys on the call was that they will be more data-driven
| and have already been using data analytics far more extensively
| than ever before. I suspect the case in the linked release came
| about from those efforts:
|
| > "Using sophisticated data analysis, the SEC was able to
| uncover this insider trading ring and hold each of its
| participants accountable to ensure the integrity of our
| markets," said Joseph Sansone, Chief of the SEC Enforcement
| Division's Market Abuse Unit.
|
| I think in time the SEC's enforcement in this area will become
| more automated and efficient.
| monkeybutton wrote:
| Is there somewhere that I could read more about the analytics
| used to catch insider trading?
| elliekelly wrote:
| I don't have a good resource to point you to because most
| of what I know is from having seen data requests and from
| discussions with colleagues. To my knowledge the SEC hasn't
| said much about _how_ they use analytics and I suspect
| that's deliberate.
|
| The SEC has been gathering data after big price swings to
| identify potential insider trading for a while but my
| understanding is that they're now able to assign an
| insider-trading risk-score to transactions that made money
| (or avoided a loss) by trading just before the swing.
|
| What's interesting is the risk-score seems to involve some
| degree of "who you know" and seems to de-emphasize the old
| metric used to prioritize investigations: how big your
| profit/loss avoided was. So rather than having to identify
| the big winners (or loss avoiders) and investigate those
| transactions they can instead focus on the transactions
| most likely to have been "tipped" by an insider. (This is
| entirely my own speculation but I think you can see it a
| bit in the attached press release. It's an unusual chain of
| relationships between and among the six people charged and
| the two public companies. Insider > tips friend > tips guy
| who owes him money > tips three friends. I'd venture to
| guess there was some transaction data that allowed the SEC
| to form the link between the accounts profiting and the
| insiders because $1.7 million isn't a terribly huge sum to
| have SEC staff chasing after.)
|
| It also seems, judging by Gensler's recent comments,
| they're considering gathering data about planned and
| _forgone_ 10b5-1 transactions presumably for the purpose of
| applying insider trading analytics.
| epgui wrote:
| (Leaving a comment as I would also like to know more about
| this.)
| fallingknife wrote:
| As you can see from the details here, they hardly needed
| "sophisticated analysis:"
|
| https://www.bloomberg.com/opinion/articles/2021-06-16/don-t-.
| ..
| kosievdmerwe wrote:
| After they knew who to investigate it likely was easy, but
| I don't see how they discovered who to investigate in the
| article you linked.
|
| You need some way to detect smoke before you can go looking
| for the fire. And given the large number of trades in the
| US stock markets, I don't believe this is an easy problem.
| elliekelly wrote:
| Levine's analysis is regarding to the evidence gathered
| from the investigation while the statement from the press
| release refers to whether or not a group of transactions
| warranted investigation in the first place. The
| "sophisticated analysis" the SEC refers to is akin to an if
| statement while the evidence set forth in the complaint
| (and referenced by Levine) is the result of running "then
| investigate" when $isSuspicious returned true.
| vmception wrote:
| > In parallel proceedings, the U.S. Attorney's Office for the
| Northern District of California today announced related criminal
| charges against Brown, Wylam, and Sood.
|
| Press F to pay respects
| paulpauper wrote:
| >The SEC's complaint further alleges that Bannon tipped Sood with
| material, nonpublic information concerning Bannon's employer,
| Fortinet Inc. As alleged in the complaint, Bannon learned in
| early October 2016 that Fortinet was going to unexpectedly
| announce preliminary negative financial results. Bannon allegedly
| tipped this information to Sood, who used it to trade. After
| learning the information, Sood allegedly tipped Wylam and
| Ramaiya, who also traded.
|
| It's like the stock market equivalent of the blockchain. No
| matter how long or convoluted the chain of communication is ,
| they can always piece it together.
| sanguy wrote:
| The penalty should be:
|
| - Seizure of all stock holdings: logic is it's all tainted - Ban
| from all future trading for life, except index funds
| camel_Snake wrote:
| this sounds ripe for abuse.
| onemoresoop wrote:
| SEC is such a joke, they let a lot of wrongdoing go by then once
| in a while find a small fry to show that they're doing something.
| SEC cannot enforce naked shorting for example and it comes down
| to the transgressor to report themselves.
| zeruch wrote:
| Holy crap...I'm pretty sure that the Marcus Bannon mentioned is
| someone I went to high school with.
|
| What an utterly bizarre, and shrinking universe.
| runawaybottle wrote:
| Sounds like a scare tactic to warn any pump and dumpers on
| Stocktwits and wsb with any kind of knowledge on large upcoming
| inflows into a stock. They are obviously out there and hidden in
| a raucous crowd.
| nphard85 wrote:
| Curious about this scenario:
|
| Bob works for company A which is a vendor for companies B, C and
| D. Most of company A's revenue stream is dependent on how well B,
| C and D are doing. Bob has insider knowledge of Company A's
| finances using which he trades stocks of B, C and D.
|
| Is this considered insider trading or not?
| qqtt wrote:
| I'm not sure if this is standard for SEC press releases, but why
| do they include details such as, "he was a school teacher" and,
| "he owed gambling debts"?
|
| I've always suspected the SEC investigations regarding things
| like insider trading are typically the opposite of justice and
| designed to go after the smallest possible players while giving
| the illusion of enforcement. And these details in an allegedly
| serious investigation just seem to make the whole thing reek of
| small time gossip material.
|
| It's just kind of surreal seeing this type of language in an
| official SEC press release regarding what I'm sure they would
| like us to believe they consider a serious crime.
| realist2001 wrote:
| >> why do they include details such as, "he was a school
| teacher" and, "he owed gambling debts"?
|
| They want to signal to larger players (hedge funds, etc) that
| enforcement is only on smaller players like high school
| teachers. They are signaling to their rich friends and power
| brokers in NYC/Connecticut that there is nothing to worry about
| w/r/t to the real, bigtime insider trading.
|
| This comment is meant to be both sarcastic _and_ true, however
| depressing.
| elliekelly wrote:
| > They want to signal to larger players (hedge funds, etc)
| that enforcement is only on smaller players like high school
| teachers.
|
| Galleon Group and SAC Capital would disagree. I believe
| there's also a pretty senior (now former) Apple attorney
| who's recently been charged.
| clipradiowallet wrote:
| justice.gov and sec.gov are not just-the-facts style sites.
| They are meant to inform the public as well as vilify wrong-
| doers. Part of making sure their stories are picked up
| widely, is including those types of details to make the story
| more "interesting" to the masses.
| Simulacra wrote:
| Mayhaps to make the story more salacious?
| rasz wrote:
| Would you prefer "he wasnt sufficiently politically connected"
| and "his family never made friends in the right circles"
| VWWHFSfQ wrote:
| > designed to go after the smallest possible players
|
| SEC doesn't have infinite resources to go after every possible
| financial crime. They go after the ones that have the highest
| likelihood of successful prosecution. This is the case with
| most prosecutions like this.
| spaceribs wrote:
| > SEC doesn't have infinite resources to go after every
| possible financial crime.
|
| So that makes token gestures acceptable?
| throwaway0a5e wrote:
| That's called "revenue policing" and the only people who like
| it are the people high status enough to not be subject to it.
| notsureaboutpg wrote:
| Whatever it's called doesn't matter. There's not a viable
| alternative. If you don't prosecute charges with
| substantial evidence, the risk of loss increases and
| eventually the department bleeds money at too large a
| degree and gets shut down causing no enforcement
| JumpCrisscross wrote:
| > _the only people who like it are the people high status
| enough to not be subject to it_
|
| Everyone at the SEC is keenly aware that bagging a high-
| ranking financier is a ticket to higher office.
| jessaustin wrote:
| Can we come up with an example of an SEC official
| building upon an investigation of a "high-ranking
| financier" in order to obtain high office?
| verbify wrote:
| Not SEC, but US attorney for the Southern District Preet
| Bharara apparently made his fame by going after Wall
| Street bigwigs. I don't know much about him besides his
| Wikipedia page (which could be edited by a PR firm), but
| it seems that was his career trajectory.
| shard wrote:
| Another not-SEC example would be Eliot Spitzer who
| parlayed his policing of Wall Street corruption as the
| Attorney General of New York into a governorship.
| byset wrote:
| SEC pursued junk bond pioneer Michael Milken in the
| 1980s, Ivan Boesky before that... unsure of specifics of
| SEC personnel getting to "high office" because of that
| but seems obvious that high profile successful
| prosecutions would be career-making
|
| (Granted those examples are from the 80s but i would
| think there are more recent examples...)
|
| Milken was prosecuted by Rudy Giuliani which didn't hurt
| Giuliani's career, but Rudy was a US district attorney or
| something, not SEC
|
| Agree with your sentiment generally though, seems like a
| boatload of people could have been put away after the
| financial crisis but they instead profited from bailouts
| version_five wrote:
| Milken's prosecution didnt really hurt his career much
| either. Hes still a billionaire (and if I remember right,
| his brother did very well too).
|
| PS - read Den of Thieves again - there is an imo strong
| parallel between what was going on with junk bonds in the
| 80s and what is happening now with VC money. When Milken
| was indicted, he couldn't keep all the balls in the air
| anymore and the whole thing fell apart. I'm very
| interested to see what parallel will play out this time
| and when.
| byset wrote:
| Didn't hurt his career much? He was barred from the
| securities industry forever. Sure he had a lot of money
| left, but how can you know where his career would go if
| he weren't prosecuted? That's like saying that if Bill
| Gates were forced to cash out of Microsoft in the 80s it
| wouldn't have affected his career much because, after
| all, he would still be a billionaire
| clipradiowallet wrote:
| > Everyone at the SEC is keenly aware that bagging a
| high-ranking financier is a ticket to higher office.
|
| Just speculating here, but I imagine everyone at the SEC
| is also aware that going after someone with 9-figures-
| and-higher wealth may not be cut and dry. At those
| levels, the person you are going after can wreck your
| [and all your colleagues] lives in new and interesting
| ways that aren't apparent.
| rdtwo wrote:
| That's why they go after 7 and 8 figure guys they are way
| easier to pick off but still juicy
| acuozzo wrote:
| > At those levels, the person you are going after can
| wreck your [and all your colleagues] lives in new and
| interesting ways that aren't apparent.
|
| Which is exactly why having that much wealth should be
| impossible or illegal. No single person should have that
| much power.
|
| With that being said, who am I kidding? It's obvious that
| the old forms of power haven't gone away and never will.
| trhway wrote:
| >bagging a high-ranking financier is a ticket to higher
| office.
|
| And not bagging is a ticket to a very nice corner office
| I guess :)
| slickrick216 wrote:
| Which is quite frankly disgusting even if society does
| have a somewhat merited hatred of bankers.
| stale2002 wrote:
| Do you have an alternative solution, to getting around the
| problem of the fact that they don't have infinite
| resources?
|
| Do you think that they should just go after crimes, at
| random, even if that means that much less crimes are
| successfully caught, because of the inefficient use of
| resources?
| jonas21 wrote:
| The full context in the press release is:
|
| > _The SEC's complaint alleges that Wylam, a high school
| teacher and bookmaker, traded on this information and also
| tipped Naveen Sood, who owed Wylam a six-figure gambling debt.
| Sood allegedly traded on this information and tipped his three
| friends Marcus Bannon, Matthew Rauch, and Naresh Ramaiya, each
| of whom also illegally traded on the information._
|
| In order to make an insider trading case against people who are
| several degrees out, they have to show how non-public
| information flowed to them. Establishing that Wylam is a
| bookmaker and Sood is a client of his is an important part of
| this. Maybe the "high school teacher" part isn't particularly
| relevant, but if you cut it, it would sound like he was a full-
| time bookmaker, which isn't the case.
| [deleted]
| slickrick216 wrote:
| Yes
| granshaw wrote:
| I also found the "best friend" part to be strange - I expected
| language more like "close acquaintance" instead
| Wistar wrote:
| BFF.
| hilbertseries wrote:
| bestie
| byset wrote:
| Wouldn't that just leave you with more syllables and less
| precise language?
| spoonjim wrote:
| I'll post what I posted a week ago:
|
| > Insider trade a million, you've got a problem. You have to
| insider trade a billion so that you're untouchable. This is
| probably the hourly volume of insider trading at many hedge funds
| like SAC.
| cltby wrote:
| In light of the AP's new policy on minor crime reporting, I was
| curious how they would treat this story. Unfortunately, their
| website has no coverage. However, they did report today on
| another (alleged) insider trading case, and they use names
| liberally.
|
| [1] https://apnews.com/article/nyc-state-wire-ny-state-wire-
| new-...
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