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The worst part about this is that I've heard they wouldn't have been captured if they didn't get greedy and increase the size of their trades and continue to re

The worst part about this is that I've heard they wouldn't have been captured if they didn't get greedy and increase the size of their trades and continue to reuse the same trading accounts. Allegedly they were hacking into news services and reading news before it was publicly released, which means their investing time frame was measured in hours and minutes. This makes it much easier for the SEC to find this type of behavior as these types of trades, especially in the options markets stand out, when done at large sizes. The SEC takes alot of grief, some well earned, but you should assume that when a stock moves, they'll run an automated scan of every trade that profited from that in the days/hours leading up to that move and over time they'll cross reference those trades to watch for accounts that continue to do this over time when they have reason to suspect illegal activity. Think of it like athletes blood samples being held for years after competition. They won't test all the samples held but they have the data there to look back on if they find a reason to.

sliverstorm 11y ago
The worst part about this is that I've heard they wouldn't have been captured if they didn't get greedy I've heard before that getting greedy is one of the most common downfalls, and that fraudsters who can manage the scale of their fraud are the hardest to catch. For example, there was some guy who got hold of a $1 printing press. He produced & laundered modest amounts of fraudulent bills for something like 20 years and was never caught; they only figured it out when a certain $1 printing press was found in his estate sale. Think of it like athletes blood samples being held for years after competition. They won't test all the samples held but they have the data there to look back on if they find a reason to So you're saying the athletic governing bodies are guilty of illegal vein-tapping, and have some kind of blood bank of every athlete ever somewhere out in the Utah desert...? :)
stephengillie 11y ago
> Allegedly they were hacking into news services and reading news before it was publicly released, which means their investing time frame was measured in hours and minutes. Contrary to an economist's default assumptions, information doesn't travel instantaneously, and not all actors are immediately logical. To put it another way, there's a delay where profitable arbitrage is possible with widely-distributed information because many large players are slow-to-move. In short, there is reaction time - sometimes a 2-4 day window - between when news is released and share prices get where they're going. So those hackers had even more lead time in executing.
- eitally 11y ago
  Unless you know this for fact, I'm doubtful. At my last company, we released both earnings & press releases after market close, with earnings reports being released on the same day as our earnings call (so, press release at 4pm ET, earnings call at 5pm ET).
ConfuciusSay 11y ago
If these trades were being done by DB or Citadel, there'd be a slap on the wrist. But if you're a rogue trader, or god forbid a lone 30 year old in your parents basement, off to the big house for you. If anything this just shows that the SEC has all the tools in the world to stop illegal activity, yet it does nothing, so long as you're part of the Wall street establishment.
- tptacek 11y ago
  I do not think you can support the argument that Citadel can steal pre-release press releases and trade on them with any evidence. We get it: you think the law is different from big firms and little firms. Stipulate that it in many ways is, and that still has nothing to do with this case, in which a large syndicate of criminals actually set up a SAAS business selling tradable pre-release press releases.
- mark212 11y ago
  really? so Steve Cohen isn't part of the Wall Street establishment? How about Raj Rajaratnam and Rajat Gupta -- the last a board member at Goldman. Just started his two year stretch in the federal pen.
  - PhantomGremlin 11y ago
    I agree with you in general. There have been successful prosecutions which have resulted in significant jail time. Although the Supremes have yet to weigh in on the latest batch[1], and right now it's not looking good for the Feds. But I disagree with you about Stevie Cohen. Quite a few of his underlings took a fall, but he personally emerged scot free. He simply wrote a very big check and made his problems go away. He's busy managing his remaining billions in a "family office". [1] http://www.nytimes.com/2015/07/31/business/dealbook/us-asks-supreme-court-to-review-insider-trading-ruling.html http://www.nytimes.com/2015/07/31/business/dealbook/us-asks-...
  - ConfuciusSay 11y ago
    LOL, Steven Cohen is your example of SEC getting it right? He's the best example of how the insiders are allowed to do it, while everyone else is not. As long as you call it an "experts network" and as long as you structure your corporate hierarchy properly you can do insider trading all day every day! Just ask Steven Cohen.
lordnacho 11y ago
A trading account is much like a bank account. You can't just open a whole bunch of them, it takes a fair bit of documentation. And there's only so many banks you can do it with. You'd have to draft a bunch of people and send margin to all the accounts. Perhaps a smarter thing to do would be to try to drown out the profits with noise from a market neutral basket. A gentle updraft in the PnL would be much harder to detect, and compounding would mean you'd get pretty rich anyway.
- daemin 11y ago
  You could, but you'd have to be disciplined to the max, since the easier and logical thing to do would be to invest all of your resources into things that give you the best return, so you maximise your earning.
crazypyro 11y ago
Nobody gives the SEC grief for taking out foreign economic criminals. They give the SEC grief for focusing on tiny players in the market while the large players write/enforce their own set of rules and regulations.
- mahyarm 11y ago
  Like most enforcement bodies, they focus on ease of enforcement vs. what they should be actually enforcing. And they hate starting actions that they think they have a good chance of losing. Little guys cannot defend themselves. Big guys can.

sliverstorm 11y ago

The worst part about this is that I've heard they wouldn't have been captured if they didn't get greedy I've heard before that getting greedy is one of the most common downfalls, and that fraudsters who can manage the scale of their fraud are the hardest to catch. For example, there was some guy who got hold of a $1 printing press. He produced & laundered modest amounts of fraudulent bills for something like 20 years and was never caught; they only figured it out when a certain $1 printing press was found in his estate sale. Think of it like athletes blood samples being held for years after competition. They won't test all the samples held but they have the data there to look back on if they find a reason to So you're saying the athletic governing bodies are guilty of illegal vein-tapping, and have some kind of blood bank of every athlete ever somewhere out in the Utah desert...? :)

stephengillie 11y ago

> Allegedly they were hacking into news services and reading news before it was publicly released, which means their investing time frame was measured in hours and minutes. Contrary to an economist's default assumptions, information doesn't travel instantaneously, and not all actors are immediately logical. To put it another way, there's a delay where profitable arbitrage is possible with widely-distributed information because many large players are slow-to-move. In short, there is reaction time - sometimes a 2-4 day window - between when news is released and share prices get where they're going. So those hackers had even more lead time in executing.

eitally 11y ago
Unless you know this for fact, I'm doubtful. At my last company, we released both earnings & press releases after market close, with earnings reports being released on the same day as our earnings call (so, press release at 4pm ET, earnings call at 5pm ET).

ConfuciusSay 11y ago

If these trades were being done by DB or Citadel, there'd be a slap on the wrist. But if you're a rogue trader, or god forbid a lone 30 year old in your parents basement, off to the big house for you. If anything this just shows that the SEC has all the tools in the world to stop illegal activity, yet it does nothing, so long as you're part of the Wall street establishment.

tptacek 11y ago
I do not think you can support the argument that Citadel can steal pre-release press releases and trade on them with any evidence. We get it: you think the law is different from big firms and little firms. Stipulate that it in many ways is, and that still has nothing to do with this case, in which a large syndicate of criminals actually set up a SAAS business selling tradable pre-release press releases.
mark212 11y ago
really? so Steve Cohen isn't part of the Wall Street establishment? How about Raj Rajaratnam and Rajat Gupta -- the last a board member at Goldman. Just started his two year stretch in the federal pen.
- PhantomGremlin 11y ago
  I agree with you in general. There have been successful prosecutions which have resulted in significant jail time. Although the Supremes have yet to weigh in on the latest batch[1], and right now it's not looking good for the Feds. But I disagree with you about Stevie Cohen. Quite a few of his underlings took a fall, but he personally emerged scot free. He simply wrote a very big check and made his problems go away. He's busy managing his remaining billions in a "family office". [1] http://www.nytimes.com/2015/07/31/business/dealbook/us-asks-supreme-court-to-review-insider-trading-ruling.html http://www.nytimes.com/2015/07/31/business/dealbook/us-asks-...
- ConfuciusSay 11y ago
  LOL, Steven Cohen is your example of SEC getting it right? He's the best example of how the insiders are allowed to do it, while everyone else is not. As long as you call it an "experts network" and as long as you structure your corporate hierarchy properly you can do insider trading all day every day! Just ask Steven Cohen.

lordnacho 11y ago

A trading account is much like a bank account. You can't just open a whole bunch of them, it takes a fair bit of documentation. And there's only so many banks you can do it with. You'd have to draft a bunch of people and send margin to all the accounts. Perhaps a smarter thing to do would be to try to drown out the profits with noise from a market neutral basket. A gentle updraft in the PnL would be much harder to detect, and compounding would mean you'd get pretty rich anyway.

daemin 11y ago
You could, but you'd have to be disciplined to the max, since the easier and logical thing to do would be to invest all of your resources into things that give you the best return, so you maximise your earning.

crazypyro 11y ago

Nobody gives the SEC grief for taking out foreign economic criminals. They give the SEC grief for focusing on tiny players in the market while the large players write/enforce their own set of rules and regulations.

mahyarm 11y ago
Like most enforcement bodies, they focus on ease of enforcement vs. what they should be actually enforcing. And they hate starting actions that they think they have a good chance of losing. Little guys cannot defend themselves. Big guys can.