[HN Gopher] What Happens When a Fifteen Year Old Pumps and Dumps...
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What Happens When a Fifteen Year Old Pumps and Dumps with a Net
Profit of $800k? (2002)
Author : melenaboija
Score : 149 points
Date : 2024-03-24 15:52 UTC (7 hours ago)
(HTM) web link (www.kentlaw.edu)
(TXT) w3m dump (www.kentlaw.edu)
| wil421 wrote:
| How is this any different than meme stocks on WallStreetBets?
| hyperhello wrote:
| He makes the case that this is no different from anything
| anyone does at all. The SEC is essentially a spam filter.
| williamDafoe wrote:
| No, Lewis argues that SEC is a protection racket! They make a
| bunch of rules and regulations with the input of Wall Street
| so that Wall Street can pump and dump legally!! Congress will
| not touch this radioactive protection racket because they are
| doing insider trading on legal changes which should also be
| illegal...
| heartbl33d wrote:
| Only difference is he was doing this in the 90's. Today you
| will find telegrams pumping/dumping and manipulating the price
| of small stocks, crypto, etc.
| ghaff wrote:
| I was doing some market research for a penny stock company in
| 2000 and made my way over to a stock discussion board devoted
| to the company at one point. The amount of scaminess,
| cheerleading, and ignorance (feigned or otherwise) was
| unreal.
| ghaff wrote:
| This was a long time ago in a galaxy far far away.
|
| Also the article mentions these were thinly-traded stocks.
|
| I assume the argument would be that today this sort of thing is
| happening because it's Tuesday. i.e. it's normalized and if you
| get burned, it's almost someone's civic responsibility to part
| you from your money.
| gmd63 wrote:
| Scammers who think it's their "civic responsibility" to dupe
| their fellow man with intentional fraud should think two or
| three times before committing to that logic.
|
| If they want to value someone's worth to the human team based
| on their gullibility to professional liars, it's not reaching
| very far for other like-minded logicians to value the
| scammers' worth based on their ability to navigate any other
| man-made stressor, like their ability to dodge a bullet.
| ghaff wrote:
| My last crack should probably have had a /s. I don't
| actually believe that.
| gmd63 wrote:
| I didn't take you as believing it, just as framing what
| others might think. I've seen the sentiment too and it
| frustrates me.
| fmajid wrote:
| It's known as Canada Bill Jones' Motto: "It is morally
| wrong to allow suckers to keep their money."
| pc86 wrote:
| Almost as frustrating as people who posit the penalty for
| lying/fraud/hucksterism should be death.
| gmd63 wrote:
| I didn't suggest that. Just illustrating how the
| incredibly moronic logic of "weeding out people who don't
| meet my standards of fitness is a civic duty" can be
| easily extended to non-financial areas of life.
| underlipton wrote:
| The banksters are aware. Hence, doormen, gated communities,
| and commuting by helicopter.
| tacocataco wrote:
| Good luck getting law enforcement to care about you getting
| your stuff stolen.
| lebean wrote:
| The difference is merely the essential part of meme stocks that
| make them meme stocks and not just a pump-and-dump scheme
| executed by some guy. Other than that, though, totally the same
| thing.
| gmd63 wrote:
| I'm betting that large players manipulate the market through
| "meme stocks" just like advertisers astroturf reddit.
| seadan83 wrote:
| I'm on a phone, apology for lack of citation. I ran across
| an article that found it was mostly memers bidding the
| price up against each other. The short squeeze aspect did
| come un, but not as often and not to the extent that is
| commonly claimed.
| hiddencost wrote:
| Both are morally outrageous and are or should be criminal?
| hilux wrote:
| Interesting. A little googling turns up that 25 years later, he's
| still in the pump-and-dump business!
|
| Do what you love, I guess.
| cmcaleer wrote:
| I found this Twitter account last posted to in 2014.
|
| https://twitter.com/lebedbiz
|
| I checked a good few of the stocks he listed. I figured he
| would have struck a lucky score at one point but he seemed to
| have an uncanny ability to always pick losing stocks.
|
| I was hoping for a happy ending like how many of the people I
| played Runescape with who hosted dicing games, speculated and
| flipped in-game assets became successful quants irl, but he
| sure did seem to just pick a gimmick and roll with it, never
| evolving or changing.
| Solvitieg wrote:
| Is it safe to assume they transitioned to become an anonymous
| crypto trader around this time?
| shnock wrote:
| Really? Merching in RS3 always seemed to be more of a pump
| and dump than anything that overlapped with real life
| quantitative investing
| Frummy wrote:
| If theyre working as quants now, they were probably around
| before RS3 as well. I remember daytrading the grand
| exchange personally. There were plenty of profitable
| patterns that were basically guaranteed to work. I can see
| how someone who could program at the time could get much
| higher volumes by automating multiple accounts. The problem
| was finding profitable new trades at different levels of
| wealth, what worked at one volume would have to be replaced
| eventually. I never got into clans and such. I got scammed
| a few times especially memorable was a scam with a sort of
| party of social proof around the scammer and they would
| rinse repeat in every world, some things were so organised
| that you got really surprised by the intricacy of the
| scams.
| seadan83 wrote:
| Not a surprise it is loser stocks.
|
| The pump and dumper wants cheap, low volume stocks,
| preferably those with a plausible turnaround story.
|
| The pump and dumper does not disclose holdings or the
| prospect for them to acquire or sell. Hard to then know if
| the shilling was unsuccessful or not.
| jldugger wrote:
| Not sure how it came to be that every article publishes this
| kids name, but I'm starting to find a tragic arc to this
| guy's life. Dead twitter account, no LinkedIn account, and
| apparently was booked for narcotics possession in 2016. All I
| found was an arrest record[1]. Maybe he was just on some bad
| meds and the police caught him before things got worse, maybe
| they made the whole thing up, but many citations from his
| Wikipedia page(!) 404 now, and I have my theories as to why.
|
| [1]: https://www.northjersey.com/story/news/passaic/wayne/201
| 6/03...
| bayouborne wrote:
| Sep 3, 2012 I Am Legend.
| ProjectArcturis wrote:
| If you made half a million bucks doing something in high
| school, it'd be pretty hard to go the college route and hope to
| eventually get a job grinding $100k a year.
| adventured wrote:
| If you're good at a thing, you can easily make a lot more
| than that on Wall Street. $500k is just your bonus.
| falcor84 wrote:
| TL;DR: he argues that he did the same as everyone else on Wall
| street, so the SEC fines him $285,000, letting him keep more than
| half a mil of net profits. The system works as intended</sarcasm>
| arkades wrote:
| The SEC only found wrongdoing in eleven trades, whose profit
| netted approx $272K. They did not penalize him for trades not
| found in violation of the law.
|
| Clearly, too long, didn't read.
| pierat wrote:
| Again, not a real court. And no jury, and basically a fake
| judge.
| paulryanrogers wrote:
| > Lebed professes that he did nothing wrong - he did nothing
| different from Wall Street analysts. He states that he learned
| how people react to the stock market and acted on that knowledge.
|
| So you trick people by lying to them, and it's ok because you
| take their money indirectly via the stock market. And because
| some analysts also do this (often suffering legal consequences),
| then it's definitely not wrong?
|
| Shameful. And the father getting the kid an E-Trade account after
| the mother closed his other account? Sounds like the father
| should be sanctioned too.
| EGreg wrote:
| The entire trading industry is a zero-sum game bro. For someone
| to win someone else has to lose. As is the advertising industry
| and surveillance capitalism industry that powers the "free
| web". (Only at the edges is new value created. Most of it
| exists to have large institutionals take money from the small
| newbs, you're the fish at the poker table.)
|
| And more broadly, capitalism exploits people.
|
| This is like blaming Andrew Tate for exploiting women but
| throwing up your hands when Amazon Nike and Apple were running
| sweatshops and warehouses at scale, exploiting people in
| general.
|
| Technology just made it easier to extract the rents (eg tax the
| uber drivers and passengers to pay the shareholder class of
| Uber).
|
| And generative AI just automates that further. Thanks for all
| your creativity, judgment and input, humans. You can be fired
| now thanks!
|
| Hey, if you look at the man behind the curtain, you'll see all
| your favorite stuff needs it to even function. For example for
| Sam Altman's ventures we have:
|
| Kenya's cheap brains: https://time.com/6247678/openai-chatgpt-
| kenya-workers/
|
| Kenya's cheap eyeballs: https://www.bbc.com/news/world-
| africa-66383325.amp
|
| Don't shoot the messenger
| voisin wrote:
| I concur - we as a society have agreed implicitly (since I
| think around the 1980s) that it's everyone for themselves so
| take whatever the hell you can for yourself, consequences be
| damned. If you're lucky, you'll be dead before the world
| burns and society devolves into chaos.
| nullstyle wrote:
| In the immortal words of Booker T: "don't hate the playa,
| hate the game"
| seadan83 wrote:
| There are places in the world that is an apt description.
| The US is closer to that than previously (as judged by
| effective tax rates on millionaires comparing the 1950s to
| today), but nonetheless, the US us not "there" yet and
| still has a ways to go
| Thorrez wrote:
| >The entire trading industry is a zero-sum game bro. For
| someone to win someone else has to lose.
|
| Traders add liquidity. That liquidity allows me to easily buy
| and sell stocks without waiting long periods or worrying
| about getting ripped off by the spread. And since the economy
| isn't zero-sum, it's possible for everyone to end up better
| than before.
| peteradio wrote:
| Does trading stocks somehow cause an increase production of
| actual stuff? If not, I don't see how everyone ends up
| better off.
| hallway_monitor wrote:
| People are saying that pump and dump schemes are
| unethical even if they're not always illegal. I would
| assert that investing for short-term gain is always
| unethical and the only way the stock market really
| benefits retail investors is when people invest and hold
| for long-term gains.
| AnthonyMouse wrote:
| > Does trading stocks somehow cause an increase
| production of actual stuff?
|
| Sure it does. If the price of a stock changes, it becomes
| easier/harder for that company to raise money relative to
| other companies. If it's a good company then making their
| shares go up can increase production of actual stuff
| because they can afford to build more factories etc. If
| it's an inefficient company and its shares go down then
| the people who sold it can go invest that money in
| something else. There is a net increase in production if
| the company who gets the money is the one more efficient
| at using it to make stuff than the alternative, i.e.
| share price becomes "more accurate" as a measure of the
| company's market efficiency.
| jokethrowaway wrote:
| You have to buy stocks or you'll money will go to the
| government thanks to inflation.
|
| Without the government the stock market would be less
| crowded.
| everforward wrote:
| > The entire trading industry is a zero-sum game bro.
|
| It's not, and even a cursory understanding of what zero-sum
| games are and how the stock market works would tell you that.
|
| How does the market grow if all trades are zero-sum? How do
| recessions happen if all trades are zero-sum?
|
| Some portion of trades are zero-sum, maybe even most of them.
| Stock markets don't function if every trade was zero-sum.
|
| Pump and dump schemes are bad because they distort
| information in the marketplace. The tradeoff is supposed to
| be that these major firms perform price discovery, and in
| exchange for providing accurate prices to the market, they
| are allowed to arbitrage off the difference between the
| current price and the "true" price.
|
| Pump and dump schemes don't do any price discovery, they do
| the opposite. They create a fake new price, arbitrage off
| that difference, and then leave the followers holding the
| bag.
| amne wrote:
| it's not, but only because someone keeps printing more
| money.
| Solvency wrote:
| It's almost like a financial system that is so incredibly
| prone and vulnerable to manipulation shouldn't form the
| backbone of our entire economy.
|
| Oh wait. This is by design so the elite can retain all
| money and power.
| __MatrixMan__ wrote:
| > How does the market grow if all trades are zero-sum?
|
| The same way a cancer does: by repurposing adjacent systems
| in service of propagating itself, often to the determent of
| the function of those systems.
|
| In the case of a financial market this means people
| spending their time watching lines squiggle around on a
| screen instead of finding real problems to solve.
|
| Referring to the increase of stock prices as an indicator
| that markets are positive sum is a little like referring to
| an increase in hit points as an indicator that D&D is
| positive sum
|
| It's not useful to use a system's own abstractions to
| measure its effectiveness.
| gmd63 wrote:
| Cancer is an exploitation of the politics present in
| human cellular biology. The DNA of what makes us human
| mammals is molecular capitalism in this analogy. You can
| dismantle that, but then we would be floating amoebas in
| the primordial ooze.
|
| What you can do is identify when cells aren't behaving in
| good faith and punish them appropriately (through chemo
| etc) and find ways to prevent that behavior from
| surfacing again (diet / avoiding carcinogens / unknown
| future solutions).
| __MatrixMan__ wrote:
| Agreed, I'm not for dismantling it wholesale, just for
| being a bit more targeted with our punishments.
|
| That is, I don't think that "the markets are up" is not
| an adequate indicator of "behaving in good faith". You
| have to look more closely at the actual outcomes.
| Whatever is being invested in, does it make life better
| or worse for the rest of us, etc.
| gmd63 wrote:
| I agree we need more keen punishments, and am annoyed by
| market value being some coarse indicator for economic
| health. It's been more morally pleasing to me to see
| criminal companies and "currencies" collapse in the past
| few years than it has for me to have seen the general
| market go up, as long term health depends on excising
| fraud.
| seadan83 wrote:
| Outside money flows into the market, this allows it to be
| positive sum.
|
| For the DnD analogy, it is as if you had a cleric.
|
| Eg: IPO sells at $2, next seller buys at $4, next at $6,
| etc. Everyond makes money in that scenario. Eventually
| there can be losses, do all the losses counter balance
| these profits? No, because on net everything went up. If
| there were always trades that had losses to balance the
| gains, only then it would be zero sum.
|
| What's more, people convert types of holdings all the
| time, and it is the big players that move things. When a
| mutual fund allocates 1% more to stocks, or 1% less and
| putd that to bonds, those are very big net new or net
| negative money flows. So, it's not just paychecks being
| added in, there are lots of sources of dynamism to make
| the stock market system anything but closed. There is net
| new money flowing into it all the time.
| __MatrixMan__ wrote:
| Money gets created when people take out loans which
| creates debt which is then traded in the markets. That's
| not money flowing into the markets, that's just the
| markets doing their own internal bookkeeping (much like
| D&D uses HP for internal bookkeeping about character
| health).
|
| If you want to convincingly argue that markets are
| positive sum you have to demonstrate that markets produce
| more than they consume in terms of something besides
| money. E.g. when some of the factory workers quit to go
| be day traders, the factory ends up producing more while
| consuming the same or less due to the positive effects of
| the investments enabled by the increased trading
| activity.
|
| This might be the case in some cases, and it won't be the
| case in others, and I don't know how to sum it in
| aggregate. Presumably somebody does.
|
| Whether it comes out positive or negative, asset prices
| are an implementation detail, not the thing we're
| measuring.
| seadan83 wrote:
| I'm responding to only: "> How does the market grow if
| all trades are zero-sum?"
|
| I'm not trying to say that markets are necessarily a net
| positive. But we should also not be myopic about it
| either. There is more to it.
|
| Firstly, money being made solely by trading is rent
| seeking. It's maybe even the definition of rent seeking
| (?) Personally I'd be in favor of tax rates in the 40% to
| 50% region for rent seeking (long term and short term
| capital gains tax IMO should both be doubled). Perhaps we
| agree a bit there.
|
| > Money gets created when people take out loans which
| creates debt which is then traded in the markets
|
| This is still net new money into the market, ergo, the
| market is not at all zero sum. There is new money flowing
| into it. That _negates_ the statement that there must be
| one person losing for every person winning in the stock
| market, it is not zero sum. Everyone can actually be
| making money because there is new money being injected
| (and the opposite can be true when money is net leaving
| because interest rates are high and everyone is putting
| their money to cash or bonds instead).
|
| Same thing happens in a Ponzi scheme, everyone can
| actually be making money while there is new money flowing
| into the system.
|
| In the example you stated, if a person borrows money
| against their house, they are moving money away from real
| estate to the market. Their wealth is net-zero in that
| scenario, but relative to the market - the market saw a
| net increase. Thus, the market is not a closed system, it
| is therefore not by necessity zero-sum - it's possible to
| have more winners than losers when trading (and/or more
| losers than winners too)
|
| > If you want to convincingly argue that markets are
| positive sum you have to demonstrate that markets produce
| more than they consume in terms of something besides
| money. E.g. when half of the factory quits to go be day
| traders, the factory ends up producing more while
| consuming the same or less.
|
| Yeah, this is what happens with IPO. Oatly is an example,
| they had a supply crunch, they could not produce enough
| milk for store shelves. With their IPO money they funded
| the construction of additional factories to increase
| their production capacity. I think people forget this,
| the IPO of a stock is a huge injection of money to a
| company, as-is whenever the company issues more stock.
| Amazon is another example, instead of using cash to pay
| employees, they used stock; which freed up cash to go to
| other places. Though, post-IPO, shares being traded
| around is arguably all just rent seeking. A company can
| still issue more shares too though. This very thing saved
| both AMC and GME; both of those companies would have gone
| under if they were not able to raise money by issuing
| stock.
|
| On the other side, this situation is not always fully
| pure. Plenty of companies are run by MBAs that give
| themselves too many shares & their sole goal is to go
| public so they can offload their holdings rather than
| grow their company. Still though, the primary reason for
| stocks to exist is that companies can acquire additional
| funding without taking out loans, they get that funding
| by trading ownership. That's still a thing even if there
| is a lot of other corruption & rent seeking relating to
| it. Thus, we should not be myopic it, there is more to
| it.
| AnthonyMouse wrote:
| In general there are two ways for companies to make
| money. 1) They make something that otherwise wouldn't
| have been made, or make it more efficiently than the
| competition and then capture volume with lower prices. 2)
| Rent seeking; they extract higher profits from the same
| activity, e.g. by buying their competitors and raising
| prices.
|
| Traders do the work of finding the companies that can do
| one of these things and allocating resources to them so
| they can do them. When it's the first one, the societal
| gains are quite significant. When it's the second one,
| well, there are supposed to be laws against that and if
| it's happening then we need better laws or better
| enforcement.
| __MatrixMan__ wrote:
| I'd argue for a third category where the new thing
| addresses a problem that the company themselves is making
| more problematic (e.g. TurboTax) or where "more
| efficiently" involves cases where costs to the company
| are exchanged for costs to society (e.g. petroleum
| companies, cambridge analytica).
|
| I think this category represents the majority of economic
| activity today, which is why I'm skeptical of markets
| being zero sum.
|
| The result is the same though: find was to get more of
| (1) and less of (2) and (3).
| AnthonyMouse wrote:
| The third thing is just the second thing. TurboTax
| lobbying to avoid free tax filing is obviously rent-
| seeking. It might even be more accurate to call this
| category rent seeking through regulatory capture. Fossil
| fuels would have been trounced by nuclear except that
| they lobbied to require nuclear to internalize all of its
| costs (and then some) but not their own, extracting undue
| rents by handicapping the competition.
|
| The closest you get to a third category is Cambridge
| Analytica, in which case the third category would be
| _criminal enterprises_. But these rarely remain listed on
| the stock market; you won 't find shares of the
| Guadalajara Cartel at your brokerage. It's the companies
| in the second category that do, because they're doing
| things that _should_ be illegal but _aren 't_.
| __MatrixMan__ wrote:
| I was going for extreme examples to make the point, but
| look at any modern advertiser: their products are used to
| target segments of society such that we can be encouraged
| to either turn against one another or to make some kind
| of decision which is bad for us and good for whoever is
| doing the advertising.
|
| The perspective you're describing doesn't seem to have a
| way to classify this activity as unhelpful without going
| so far as making it illegal. Without that ability, I
| don't see how we can ever expect the market's notion of
| value to find itself in line with society's values. The
| best we can hope for is a random walk within the bounds
| of "illegal".
| everforward wrote:
| > If you want to convincingly argue that markets are
| positive sum you have to demonstrate that markets produce
| more than they consume in terms of something besides
| money. E.g. when some of the factory workers quit to go
| be day traders, the factory ends up producing more while
| consuming the same or less due to the positive effects of
| the investments enabled by the increased trading
| activity.
|
| Price discovery would be the function of the markets that
| allows this. If the markets find out that iron ore
| production is going to crash because of a flood or
| something, they create demand for futures of that iron
| production, raising the price of iron and encouraging
| stability in the supply of iron via more companies mining
| it.
|
| These futures then provide stability of supply and price
| (somewhat) to the factory. Conversely, they provide
| stability of demand and price to the mine, who can sell
| their production ahead of time.
|
| I would not be surprised if most factories do employ
| investors, even if indirectly via a third-party supplier.
| Knowing that the price of iron was going to go up would
| be tremendously useful, and they would be able to produce
| their goods cheaper than everyone else if they stocked up
| on materials at lower prices.
|
| They're traded in dollars, but the same would be true in
| a barter system. Liquidity would be incredibly important
| in any non-monetary system; people would pay a pretty
| penny to be able to exchange payment in goods they don't
| want to something they did want.
|
| > Money gets created when people take out loans which
| creates debt which is then traded in the markets. That's
| not money flowing into the markets, that's just the
| markets doing their own internal bookkeeping (much like
| D&D uses HP for internal bookkeeping about character
| health).
|
| That is meant to reflect the new value being created by
| all of the entities in the market. If you don't add
| currency to account for growth, the currency increases in
| value equal to demand for it, making the currency itself
| a very attractive investment.
|
| Those loans have interest rates, so the borrowers need to
| be doing something with the cash to generate value in
| excess of the interest rate, which in turn creates value
| on the market. Loans backed by actual currency are
| dramatically more expensive to service because of
| opportunity costs. The borrower's interest rate would be
| higher than what the loan offerer thought they could get
| in return for safer investments. Current loan rates for
| practically everything are far below that.
|
| The factory benefits by having access to extra cash for
| cheap. They don't have to stockpile cash for a decade to
| open a new factory, they can borrow money and do it now
| at an interest rate that still allows them to keep most
| of the value.
| ItsMonkk wrote:
| The trading industry is separate from the investing
| industry.
|
| The investing industry is positive sum - but you must hold
| for the long-run, or only make decisions if new information
| is discovered to be an investor. Vanguard and other passive
| firms are a part of the investing industry.
|
| As the GP says, the trading industry is zero-sum.
| mhluongo wrote:
| Not a fan of over-financialization, but... if trading is
| propagating market signals to people who otherwise
| wouldn't have them, it should have some positive
| externalities?
| EGreg wrote:
| The stock market grows because companies create value for
| real consumers. Companies serving the people.
|
| But the stock market and its derivative markets are just
| people speculating on the price of the stock. So the vast
| majority of the value is a zero sum game.
|
| Think of it like the "use value" of a house, vs a housing
| speculative bubble on top. They can pump, they can dump.
| gmd63 wrote:
| Incorrect. Capitalism allows economies to accelerate the
| birth of new companies that benefit people.
|
| When it's policed and regulated poorly, yes, scammers can
| proliferate. So don't vote for politicians who lie without
| apology, and don't let people you don't trust manage your
| money or provide you with goods or services.
|
| Predatory people will exist with or without capitalism, only
| Capitalism is fine-grained democracy where you vote literally
| every day with your dollar.
|
| I should also add, don't do any scamming or predatory
| behavior yourself. Because the most important vote you make
| for how society is run is with your own actions.
| Supermancho wrote:
| > only Capitalism is fine-grained democracy where you vote
| literally every day with your dollar.
|
| I'm not sure where you get that from. Every economic model
| has trading, wherein the participants make trades (goods
| for goods). Capitalism is not democratic. Communism isn't
| democratic for a similar reason. The pareto principle (and
| natural hierarchies) appears and equality goes out the
| window for the traders.
| gmd63 wrote:
| It certainly is more democratic than any alternatives I'm
| aware of. If you don't want someone to accumulate more
| economic influence, do not pay them. The government will
| not jail you for doing so.
|
| If business is controlled by a democratically elected
| government, and 49% of the country voted against those
| officials, there is no way for them to start their own
| alternative business to articulate those preferences in
| the market.
| dragonwriter wrote:
| > The entire trading industry is a zero-sum game bro.
|
| It isn't in utility terms, which are the only terms that
| matter for whether something is _actually_ zero sum.
|
| Under certain assumptions, it is in (e.g.) dollar (or other
| specific commodity) terms, but the whole reason markets work
| at all is that the no specific commodity ( _including_ any
| fiat currency at any point in time) has a consistent
| relationship to utility across market participants.
| peteradio wrote:
| How well does that utility argument play out when companies
| see fit to grant 0 dividend?
| AnthonyMouse wrote:
| If you buy shares for $100 and they increase to $200
| without paying you a dividend, you've still made $100. If
| you prefer to have $100 in shares and $100 in cash rather
| than $200 in shares, you can sell half of your shares.
| dragonwriter wrote:
| Dividends or not are irrelevant, what matters is that the
| marginal utility of market value measured in monetary
| terms (or in market equivalent in any other commodity,
| but money is the most common one for people to mistake
| for a direct measure of utility) differs between market
| participants, and for the same participant (relative to
| others, not just by, e.g., inflation that applies in the
| same way to all market participants) at different points
| in time.
| lucianbr wrote:
| > The 2007-2008 financial crisis, or Global Economic Crisis
| (GEC), was the most severe worldwide economic crisis since the
| Great Depression. Predatory lending in the form of subprime
| mortgages targeting low-income homebuyers,[1] excessive risk-
| taking by global financial institutions,[2] a continuous
| buildup of toxic assets within banks, and the bursting of the
| United States housing bubble culminated in a "perfect storm",
| which led to the Great Recession.
|
| (from wikipedia)
|
| > In total, 47 bankers served jail time as a result of the
| crisis, over half of which were from Iceland
|
| One example of countless that could be found, that legal
| consequences are the exception, not the norm.
| vincnetas wrote:
| Well done Iceland. I would like to see ratio of jailed
| bankers to total bankers in country. Because now it looks
| like GES was mostly caused by Icelandic bankers :)
| lucianbr wrote:
| I recently read a comment by an icelander saying that
| they're basically just the same as the rest of the world,
| incapable of punishing bankers and rich people. Just that
| on this occasion, the banking sector being so small,
| something like 90% of it failed, so they really had no
| choice but to jail some people.
|
| Definitely hearsay, but it really saddened me.
| ghaff wrote:
| That sounds about right. It's a small homogeneous country
| and the situation really was _dire_. Much more so than in
| many other countries, including the US, in general. The
| US had some big failures but the system largely held
| together (with the help of the government of course).
| wouldbecouldbe wrote:
| He was just ahead of his time, this is an honest days work for
| a crypto trader.
| wslh wrote:
| Rephrasing the Arthur C. Clarke statement "Any sufficiently
| advanced technology is indistinguishable from magic." I would
| say "Any sufficiently advanced scam is indistinguishable from
| genuine trading advice.".
| dehrmann wrote:
| > So you trick people by lying to them, and it's ok because you
| take their money indirectly via the stock market
|
| No one was arguing that it was indirect; the people who lost
| money took advice from an anonymous user on a forum on tiny
| companies they'd never heard of. The morality question is still
| interesting because it hinges on whether or not people knew
| they were playing a game with deception.
| d0gsg0w00f wrote:
| These situations always remind me of a quote from Clark
| Howard who was a radio host of personal finance shows.
|
| "It's almost impossible to get scammed if you're not a greedy
| person"
| dehrmann wrote:
| Mad props to Clark Howard. He's like the Mr. Rogers of
| personal finance.
|
| also:
|
| Bulls make money, bears make money, pigs get slaughtered.
| IncreasePosts wrote:
| "Can't con an honest john"
| bagels wrote:
| Do you have examples of lies? If he just said this stock will
| go up, it seems he wasn't even wrong.
| JoshGG wrote:
| Michael Lewis wrote about this story in his book "Next". Also in
| the New York Times magazine. The articles and book have some
| pretty interesting discussion and opinion about this case.
|
| https://www.umass.edu/cyber/readings/marcusarnold.htm
| Solvency wrote:
| Why is this page double line spaced? It's outrageous on mobile.
| chatmasta wrote:
| The page is from 2002, when "mobile" was pronounced "mob-eel"
| and the closest thing to a smartphone was an early version of
| the PalmPilot.
| sillysaurusx wrote:
| Our friends pronounced it "carrying around our computer
| towers and setting up folding tables to play Planetside and
| Stepmania all night". I think it's a regional thing.
| Bud wrote:
| 2002 was actually quite late in the Palm era. The iconic Palm
| V, for instance, dates back to 1999. And BlackBerry had a
| mature smartphone by 2002. Nothing compared to an iPhone of
| course, but quite capable.
| lolinder wrote:
| Reader mode?
| kube-system wrote:
| It was generated in MS Word 2000. Double spacing of Word docs
| is common at educational institutions.
| dehrmann wrote:
| > Lebed professes that he did nothing wrong - he did nothing
| different from Wall Street analysts
|
| Except analysts usually can't trade stocks. Short sellers can. In
| theory, libel law makes that safe, but when it's a 15-year-old
| playing the penny stocks, the company won't notice or have the
| legal firepower to chase down a /r/wallstreetbets user.
| op00to wrote:
| analysts can trade stocks, though they are not supposed to
| trade counter to their recommendations.
| dehrmann wrote:
| When I googled it, it was a little murky on if it's allowed,
| and sometimes it was the analyst's employer that banned it.
| What _is_ legal is different parts of the same ~bank not
| being as independent as they should be, so the kid 's
| argument that the big boys do the same thing wasn't entirely
| wrong.
| fmajid wrote:
| > Depending on who you talk to, Lebed was either viewed as a
| person who knowingly abused the system and broke the law, or
| someone who acted no differently than Wall Street analysts acted
|
| Both of these statements can be true at the same time.
| hunter2_ wrote:
| > Depending on who you talk to, Lebed was either viewed as a
| person who knowingly abused the system and broke the law, or
| someone ... actually performing no wrong-doing.
|
| Funny how selectively quoting a bit differently makes that
| appear far less so.
| pierat wrote:
| It all comes down to selective enforcement by the not-actual-
| real-judges at the SEC.
|
| You have to go through their kangaroo court with an ALJ, and
| arger likely getting a judgement against you, can you
| actually go to a real court.
|
| And this is combined with different rules for different
| income classes.
|
| Kid from middle income family gets smacked down hard. Whereas
| billionaire employees doing work on wall street either get
| low scrutiny, or pay 2% of what they made (Read: cost of
| doing business).
|
| The "rights" of the rich are not for the rest of us.
| sdwr wrote:
| If you read the article, it looks like he got punished
| pretty lightly - had to pay back some of the gains, got to
| keep others, and had no further repercussions.
| neomantra wrote:
| The Supreme Court is considering if Administrative Law
| Judges (ALJ [1]) are unconstitutional. SEC v. Jarkesy.
|
| Fun fact: adherence to law is not required in an ALJ court.
| If one loses in ALJ, then one may proceed to appeal in a
| regular court where law must be considered.
|
| [1] https://www.law.cornell.edu/wex/administrative_law_judg
| e_(al...
| backtoyoujim wrote:
| https://www.youtube.com/watch?v=XIh44OEyQgc
|
| Cramer admits to doing basically an insider version of "flood
| finance.yahoo.com with bs" as his job
| mauvehaus wrote:
| He can afford college?
|
| In seriousness though: are analysts allowed to have an interest
| in stocks they're publishing analysis for? It seems like a fine
| line between creating an obvious conflict of interest (see: TFA
| perhaps on a more subtle level) and wanting them to have skin in
| the game so they're incentivized to provide useful analysis
| (rather than YOLO: stock goes up/down and I don't care because
| it's other people's money on the line).
|
| In general, it seems like a hard problem to compensate an analyst
| without either creating one of the above scenarios or generally
| setting up a scenario where they'd be better off trading for
| themselves on the basis of their analysis rather than providing a
| service to other investors.
| ghaff wrote:
| For both stock analysts and other types of analysts like IT
| industry analysts, it depends on the firm as far as I know and
| the rules may be more or less strict depending upon how
| involved they, or their fund, are with the given company.
| Generally, rules lean towards avoiding both conflicts of
| interest and the appearance of conflicts of interest.
| seadan83 wrote:
| The difference, an analyst states if they have a long or short
| holding and if they intend to buy or sell in the future.
|
| The scammer does not, that is the key difference.
| _sword wrote:
| At virtually all banks, equities analysts are banned from
| trading in their coverage. Banned as in, if you, your spouse,
| your dependents, etc. have an interest you didn't proactively
| disclose and dispense with you're fired on the spot.
|
| FINRA regulation states that registered equities analysts (i.e.
| the ones working at banks) at a minimum cannot trade against
| their ratings [0]. At most / all banks there are further
| restrictions that ban trading in coverage.
|
| [0] https://www.finra.org/rules-guidance/rulebooks/finra-
| rules/2...
| ch33zer wrote:
| There was a recent decision out of Texas that pump and dumps are
| legal if you do them without directly selling stock to the
| victims. So I guess that according to Texas what this guy did is
| totally fine!
|
| [PDF]
| https://assets.bwbx.io/documents/users/iqjWHBFdfxIU/rmMOgPQg...
|
| or coverage from Matt Levine:
| https://www.bloomberg.com/opinion/articles/2024-03-21/pump-a...
| giarc wrote:
| Wouldn't that mean that you can have a friend do the pump, and
| you do the dump? Sounds like the guy in the original article
| did both and therefore wouldn't be saved by that Texas ruling.
| kasey_junk wrote:
| The Texas ruling doesn't (as far as the coverage I've read)
| require that level of separation. Rather just selling to "the
| market" is enough to insulate you from fraud charges.
| bradleybuda wrote:
| The judge in that case simply does not know what they are
| talking about. This will be swiftly overturned on appeal.
| dataflow wrote:
| > The messages that Lebed posted would predict marked increases
| in the stocks value [...] In response to Lebed's messages,
| trading volume of these stocks would soar
|
| I'm so confused reading the comments here. How in the world is
| anyone defending this?
| darby_eight wrote:
| It's not hard to mock peoples' trust of the market.
| AnthonyMouse wrote:
| > How in the world is anyone defending this?
|
| Suppose you're an ordinary trader who likes high risk bets. You
| find a stock you like, you buy some. Now you go on message
| boards telling everyone you think the stock is going to the
| moon straight away. This is your sincere belief. Soon the stock
| goes up 300%. You thought it was going to go up 1000%, that's
| what you said before, but hey, it still went up 300%, that's
| still a tidy profit, so you sell.
|
| Whether this is fraud or not basically hinges on whether you
| were being intentionally dishonest, right? But now how do you
| distinguish between malice and stupidity?
| dataflow wrote:
| > Whether this is fraud or not basically hinges on whether
| you were being intentionally dishonest, right?
|
| No.
|
| Do you mean legally? or morally?
|
| Legally the offenses include things beyond what might
| strictly be "fraud" (see "fraud or deceit" as one example,
| but there are more [1]). IANAL, but failing to mention that
| your posts are with the hope of raising the price because you
| have a vested interest in that... seems like a material
| omission, if nothing else.
|
| Morally (and I'd expect legally based on the text, but IANAL)
| what matters is what he expected to happen as a result of his
| posts on the message board. If he knew people would likely
| buy the stock in response to his posts, and he intended to
| take advantage of that influence to make money off those
| sales, that's the end of the story. Whether he sincerely
| believed the stock would actually rise regardless is beside
| the point.
|
| > But now how do you distinguish between malice and
| stupidity?
|
| I'll assume you mean good faith because stupidity isn't in
| the picture here. Someone who's genuinely predicting the
| stock market correctly isn't stupid.
|
| Do you sincerely believe this person didn't expect his
| messages to raise the stock price, or that he didn't intend
| to take advantage of such a rise to make money off the stock
| sales? I sure don't.
|
| [1] https://www.law.cornell.edu/uscode/text/15/77q
| AnthonyMouse wrote:
| > failing to mention that your posts are with the hope of
| raising the price because you have a vested interest in
| that... seems like a material omission, if nothing else.
|
| And if you run around telling people that you just bought
| some of the stock you think is going to the moon, is that
| supposed to make them less inclined to buy it, or do they
| now just think you're putting your money where your mouth
| is?
|
| > what matters is what he expected to happen as a result of
| his posts on the message board.
|
| Which is the problem. How do you prove what's inside of
| someone's head? _Especially_ if they _are_ malicious and
| know what not to say out loud.
|
| > Someone who's genuinely predicting the stock market
| correctly isn't stupid.
|
| If you think the stock is going up 1000% and it only goes
| up 300%, you were wrong, and your pick was wrong, and the
| people waiting for it to go up 1000% before selling are the
| people who lost money when it went back down. But as far as
| I know, being initially wrong and then changing your mind
| before you lose your money isn't illegal.
| dataflow wrote:
| I don't have the energy to dissect all this, but you're
| completely conflating legality, enforcement, and
| provability. We have juries for a reason. Most would a
| priori find it hard to believe that someone who found a
| winning strategy would repeatedly post it on random
| message boards with altruistic intent.
| AnthonyMouse wrote:
| Juries need some basis on which to make a decision. The
| law is ridiculous if it only turns on whether you had a
| lawyer ahead of time to tell you what not to say while
| operating the identical scam.
|
| It's not clear why telling people you think a stock is
| going to go up after you've already bought it would
| require altruism, and more than that you would benefit by
| building a reputation as someone who makes accurate
| predictions if you turn out to be right, independent of
| whether anyone acts on your statement by buying the
| stock.
| toss1 wrote:
| yup, especially if they are not including the standard:
| "Disclosure: I have positions in this security."
|
| This could be interpreted as (and/or variously written to
| indicate) "this person is just talking up his/her book"
| or "they like it so much they have skin in the game".
|
| Plus the factor of how much noise there is to any signal
| in the social media & message boards, how much attention
| can one reliably actually get for your shilling?
|
| Wrong vs provably wrong are often different
| joncrocks wrote:
| The rabbit hole is deeper than you think.
|
| https://en.wikipedia.org/wiki/Mens_rea
|
| FWIW, there are other examples of where securities laws
| where intent (which is difficult to prove) is needed in
| order to demonstrate a law has been broken. e.g.
| Spoofing.
| AnthonyMouse wrote:
| Intent is often not that difficult to prove. It isn't
| murder if you were just sitting in the bell tower
| innocently cleaning your sniper rifle and it accidentally
| went off and put a round through the head of your sworn
| enemy, but you're entitled to reasonable doubt, not
| preposterous fabrications.
|
| The problem here is that the innocent behavior and the
| prohibited one are basically identical and neither of
| them is particularly implausible.
| BrandonMarc wrote:
| Brings to mind this quote from the film The Big Short:
|
| "Tell me the difference between stupid and illegal and I'll
| have my wife's brother arrested."
|
| (based on the book of the same name by Michael Lewis, a name
| I've seen elsewhere in these comments: go figure)
| gnfargbl wrote:
| I'm equally confused, but in the other direction!
|
| He was acting without any special knowledge, so the only thing
| he was taking advantage of was the gullibility of the general
| public. That's usually legal, no?
| matwood wrote:
| Talking your own book is basically CNBC in a nutshell.
| stevenjgarner wrote:
| kentlaw.edu doesn't use SSL?
| mistrial9 wrote:
| this site also ? http://whois.educause.edu
| xyst wrote:
| Rookie mistake. Always got to add in the fine print: "Not
| financial advice" and disclose current positions. You don't even
| need to say the exact positions (ie, long call option, X shares,
| ...).
|
| This is how the "stock analysts" on TV get away with it. When
| those credits role at the end of the segment, it will say
| something to this effect. Or TV show will disclose it at the
| bottom of the screen.
|
| It's a grift.
| d--b wrote:
| He was too early to the crypto party...
| daft_pink wrote:
| I'm really curious if he is unable to trade when he gets older.
| ehaveman wrote:
| from the lewis article:
|
| > the kid had bought stock and then, ''using multiple fictitious
| names,'' posted hundreds of messages on Yahoo Finance message
| boards recommending that stock to others
|
| if that's not illegal it really should be.
| littlestymaar wrote:
| If A16Z are allowed to buy thousands of their own crypto-hype
| essay in order to get it listed on NYT best-seller and drive
| shitcoin prices up, I don't see why random netizens could not
| do the same kind of things...
|
| Of course we could ban both.
| decafninja wrote:
| 15 (or let's say, 21yo) me would use $800k very differently than
| current 40yo me.
|
| 21yo me would make a beeline for the local Porsche dealership.
| 40yo me would not.
| Broge wrote:
| P
| Broge wrote:
| Power
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