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Vicearoy, a firm that specializes in shorting stocks, had a 25 page writeup [1] ready to print on why AMD was go bankrupt because of this before AMD itself even

by dsl 9y ago

Vicearoy, a firm that specializes in shorting stocks, had a 25 page writeup [1] ready to print on why AMD was go bankrupt because of this before AMD itself even fully analyzed the issues. I suspect there will be an SEC investigation. 1. https://viceroyresearch.files.wordpress.com/2018/03/amd-the-obituary-13-mar-2018.pdf https://viceroyresearch.files.wordpress.com/2018/03/amd-the-...

tgsovlerkhgsel 9y ago
At which point does it become illegal though? Is it considered insider trading if you know about a security issue but have no internal knowledge about deals etc.? I would hope that intentionally spreading false information to manipulate stock prices would be illegal, but it may be hard to draw the line between subjective interpretation, intentionally misleading interpretation, and outright lies.
- qeternity 9y ago
  > Is it considered insider trading... No, it's not. Short selling is not a populist activity, but it's essential for disciplined price discovery. This type of behavior is EXACTLY what the SEC and other regulators want to encourage: self regulation. This is a market solution to a market problem. These vulns may or may not be significant, and the people behind the release may be shady...but this is what society should want to see from market participants. It's no different than performing forensic accounting and discovering massive fraud. There have to be incentives for investors to perform due diligence, and if people only get compensated by rising prices, there will be no incentive to uncover the frauds.
  - jjeaff 9y ago
    It seems a little more nefarious than that. From what I am reading it seems that the group that is releasing the vulnerabilities has created a fake research firm and released an analysis attacking AMD. That parts reeks of market manipulation.
    - onetimemanytime 9y ago
      If it's a little fake, maybe AMD can sue them. If it's a major issue, the Govt will jump in.
    - int_19h 9y ago
      Wouldn't it just be straight up libel?
      - emn13 9y ago
        They're trying to cover their a.. with a long disclaimer. I hope that that's not enough to provide legal protection; but it may provide some protection against some laws. And then there's the issue of jurisdiction - which defamation laws apply? If they reasonably believed to be true statements that a reader might reasonably infer, is that enough to shield them - even if another reader might (incorrectly) infer something else?
    - rurban 9y ago
      Another angle is not the money. It would be that the Intel backdoor business is so profitable to the secret services, that they don't want to loose it at all costs. So they attack the one with the most effort to develop backdoors for. AMD could really harm the Intel server business. So Isreal and the US will try to push all buttons. Croudstrike could be next. That's my theory.
  - emn13 9y ago
    Up to a point: it's what a market "wants" to see insofar as it promotes accurate valuation; but not insofar as it's deceptive or promotes volatility. This press release is clearly quite heavy on those negative factors. Furthermore: using market-based incentives risks undermining other approaches - even when that's to the detriment of society. Here too there are indications of that: for maximum gain, a speculator needs to cause a scare - and thus needs to cause maximum damage and impact (on the AMD stock - if indeed that's what they're doing). It's no coincidence that responsible disclosure was not followed here! Whether in the long run that's actually a bad thing isn't something I'm sure of - but it's a factor that does need considering. Finally: self regulation is intellectually neat: and that's a risk, because people are biased towards simple and clever sounding solutions. There's nothing wrong with trying that approach; but assuming that SEC and other regulators themselves are rational actors in this matter strikes me as being overly optimistic. They aren't immune to partisan politics; and may suffer from regulatory capture. We should at least be open to the risk that some self-regulating processes may simply be inefficient. (The alternative need not be no self-regulation whatsoever).
    - jessaustin 9y ago
      ...assuming that SEC and other regulators themselves are rational actors in this matter strikes me as being overly optimistic. They aren't immune to partisan politics; and may suffer from regulatory capture. We should at least be open to the risk that some self-regulating processes may simply be inefficient. Perhaps I misunderstood this, but it seems to say that since stock regulators are human with inherent human failings, they should take a larger role in stock trading? That seems confused; what is meant here?
      - emn13 9y ago
        I'm simply saying that you should not assume that because the SEC encourages certain self-regulating features that that approach is necessarily optimal.
      - jonathanyc 9y ago
        You can claim there are problems with regulators and then argue for better or stricter regulations. Assuming infallible regulators are necessary for any regulation at all is naive and self-defeating.
  - mannykannot 9y ago
    It is a fallacy to think that because X can be beneficial, then any X is a good thing. Rain is essential, but hurricanes bring floods. This is different than "performing forensic accounting and discovering massive fraud". It's more like performing forensic accounting, finding only a few errors, but nevertheless claiming massive fraud. The real reason this is not insider trading is that there is no information provided from the inside here - simply deducing facts from outside information is both legal and ethical (though if you do have material inside information, claiming that it could have been deduced from outside is not a defense.)
    - dsacco 9y ago
      > The real reason this is not insider trading is that there is no information provided from the inside here - simply deducing facts from outside information is both legal and ethical (though if you do have material inside information, claiming that it could have been deduced from outside is not a defense.) Nit: “material inside information” isn’t illegal, and would not have to be defended at all ordinarily. Material, nonpublic information can be deduced from the outside, in which case it’s not illegal, because you are not an insider by confidentiality or fiduciary requirements. In fact, you can even trade on information provided to you by an insider with such constraints, so long as you were not entered into agreement with the same constraints, and so long as there is no quid pro quo between the parties.[1] ___________________________ 1. Though lately, the SEC has been getting more aggressive and trying to lower the bar for a quid pro quo to “friendship”...
- nichtich 9y ago
  When it's hard to draw the line from outside, prosecutors mostly try to prove their cases from the inside communications. If you email your coworker: "Guess what I found ... AMD can go bankrupt over this ..." and then short the stock it should be fine. But if you write "Let's put together an action plan to drive the AMD price down" then you would be in trouble. The FX scandal is an perfect example of this. It's true you can explain your action in perfectly legitimate reasons but you can't also call your self "The Cartel" in group chats. I'm not a lawyer.
  - deleted 9y ago
    [deleted]
- djsumdog 9y ago
  Could AMD potentially go after them with civil suits for slander, despite their well worded disclaimer?
- dsacco 9y ago
  > At which point does it become illegal though? Is it considered insider trading if you know about a security issue but have no internal knowledge about deals etc.? Trading on a security vulnerability that has not been made public is, on a basic level, not insider trading. Contrary to popular belief, there is nothing illegal about trading on material, nonpublic data. Insider trading requires the trader to have a confidentiality agreement governing the data with the company, or to have a fiduciary duty to shareholders of the company. There are basically two situations in which trading on the vulnerability would be illegal insider trading: 1. You work for the company, or are a consultant engaged by the company, and you have knowledge of the vulnerability, or 2. You report the vulnerability to the company as an outsider and, in the process, enter into a confidentiality agreement. Regarding scenario 2, merely reporting a vulnerability wouldn’t cut it. If you report the vulnerability through a channel that requires you to accept a confidentiality agreement as part of the terms and conditions of reporting (such as a bug bounty platform, like Hackerone or BugCrowd), then you can’t trade on it. On the other hand, if you report the vulnerability through a channel with no constraints, such as to a security@ email address, you have no confidentiality agreement.
  - dsl 9y ago
    3. The vulnerability is not real, or you intentionally overstate the impact publicly. Not insider trading, but definitely worthy of SEC inquiry. It's like a short position pump-and-dump.
- cbsmith 9y ago
  It becomes illegal when you misrepresent facts in order to manipulate an equity, though that's not insider trading.
toomuchtodo 9y ago
It's not against the law to trade on a zero day you discover and either fail to report, or report rapidly with no warning to the target.
- emn13 9y ago
  That can be illegal - it's market manipulation (specifically, stock bashing). It'll almost certainly depend on the details. (IANAL, and I'm not sure this is ever prosecuted).
chrismorgan 9y ago
See also https://news.ycombinator.com/item?id=16579314 https://news.ycombinator.com/item?id=16579314 on the Viceroy paper with some details confirming that that writeup was indeed ready to print.
aepiepaey 9y ago
Here's a piece on Viceroy: https://www.moneyweb.co.za/in-depth/investigations/viceroy-unmasked/ https://www.moneyweb.co.za/in-depth/investigations/viceroy-u...

by dsl 9y ago

tgsovlerkhgsel 9y ago

At which point does it become illegal though? Is it considered insider trading if you know about a security issue but have no internal knowledge about deals etc.? I would hope that intentionally spreading false information to manipulate stock prices would be illegal, but it may be hard to draw the line between subjective interpretation, intentionally misleading interpretation, and outright lies.

qeternity 9y ago
> Is it considered insider trading... No, it's not. Short selling is not a populist activity, but it's essential for disciplined price discovery. This type of behavior is EXACTLY what the SEC and other regulators want to encourage: self regulation. This is a market solution to a market problem. These vulns may or may not be significant, and the people behind the release may be shady...but this is what society should want to see from market participants. It's no different than performing forensic accounting and discovering massive fraud. There have to be incentives for investors to perform due diligence, and if people only get compensated by rising prices, there will be no incentive to uncover the frauds.
- jjeaff 9y ago
  It seems a little more nefarious than that. From what I am reading it seems that the group that is releasing the vulnerabilities has created a fake research firm and released an analysis attacking AMD. That parts reeks of market manipulation.
  - onetimemanytime 9y ago
    If it's a little fake, maybe AMD can sue them. If it's a major issue, the Govt will jump in.
  - int_19h 9y ago
    Wouldn't it just be straight up libel?
    - emn13 9y ago
      They're trying to cover their a.. with a long disclaimer. I hope that that's not enough to provide legal protection; but it may provide some protection against some laws. And then there's the issue of jurisdiction - which defamation laws apply? If they reasonably believed to be true statements that a reader might reasonably infer, is that enough to shield them - even if another reader might (incorrectly) infer something else?
  - rurban 9y ago
    Another angle is not the money. It would be that the Intel backdoor business is so profitable to the secret services, that they don't want to loose it at all costs. So they attack the one with the most effort to develop backdoors for. AMD could really harm the Intel server business. So Isreal and the US will try to push all buttons. Croudstrike could be next. That's my theory.
- emn13 9y ago
  Up to a point: it's what a market "wants" to see insofar as it promotes accurate valuation; but not insofar as it's deceptive or promotes volatility. This press release is clearly quite heavy on those negative factors. Furthermore: using market-based incentives risks undermining other approaches - even when that's to the detriment of society. Here too there are indications of that: for maximum gain, a speculator needs to cause a scare - and thus needs to cause maximum damage and impact (on the AMD stock - if indeed that's what they're doing). It's no coincidence that responsible disclosure was not followed here! Whether in the long run that's actually a bad thing isn't something I'm sure of - but it's a factor that does need considering. Finally: self regulation is intellectually neat: and that's a risk, because people are biased towards simple and clever sounding solutions. There's nothing wrong with trying that approach; but assuming that SEC and other regulators themselves are rational actors in this matter strikes me as being overly optimistic. They aren't immune to partisan politics; and may suffer from regulatory capture. We should at least be open to the risk that some self-regulating processes may simply be inefficient. (The alternative need not be no self-regulation whatsoever).
  - jessaustin 9y ago
    ...assuming that SEC and other regulators themselves are rational actors in this matter strikes me as being overly optimistic. They aren't immune to partisan politics; and may suffer from regulatory capture. We should at least be open to the risk that some self-regulating processes may simply be inefficient. Perhaps I misunderstood this, but it seems to say that since stock regulators are human with inherent human failings, they should take a larger role in stock trading? That seems confused; what is meant here?
    - emn13 9y ago
      I'm simply saying that you should not assume that because the SEC encourages certain self-regulating features that that approach is necessarily optimal.
    - jonathanyc 9y ago
      You can claim there are problems with regulators and then argue for better or stricter regulations. Assuming infallible regulators are necessary for any regulation at all is naive and self-defeating.
- mannykannot 9y ago
  It is a fallacy to think that because X can be beneficial, then any X is a good thing. Rain is essential, but hurricanes bring floods. This is different than "performing forensic accounting and discovering massive fraud". It's more like performing forensic accounting, finding only a few errors, but nevertheless claiming massive fraud. The real reason this is not insider trading is that there is no information provided from the inside here - simply deducing facts from outside information is both legal and ethical (though if you do have material inside information, claiming that it could have been deduced from outside is not a defense.)
  - dsacco 9y ago
    > The real reason this is not insider trading is that there is no information provided from the inside here - simply deducing facts from outside information is both legal and ethical (though if you do have material inside information, claiming that it could have been deduced from outside is not a defense.) Nit: “material inside information” isn’t illegal, and would not have to be defended at all ordinarily. Material, nonpublic information can be deduced from the outside, in which case it’s not illegal, because you are not an insider by confidentiality or fiduciary requirements. In fact, you can even trade on information provided to you by an insider with such constraints, so long as you were not entered into agreement with the same constraints, and so long as there is no quid pro quo between the parties.[1] ___________________________ 1. Though lately, the SEC has been getting more aggressive and trying to lower the bar for a quid pro quo to “friendship”...
nichtich 9y ago
When it's hard to draw the line from outside, prosecutors mostly try to prove their cases from the inside communications. If you email your coworker: "Guess what I found ... AMD can go bankrupt over this ..." and then short the stock it should be fine. But if you write "Let's put together an action plan to drive the AMD price down" then you would be in trouble. The FX scandal is an perfect example of this. It's true you can explain your action in perfectly legitimate reasons but you can't also call your self "The Cartel" in group chats. I'm not a lawyer.
- deleted 9y ago
  [deleted]
djsumdog 9y ago
Could AMD potentially go after them with civil suits for slander, despite their well worded disclaimer?
dsacco 9y ago
> At which point does it become illegal though? Is it considered insider trading if you know about a security issue but have no internal knowledge about deals etc.? Trading on a security vulnerability that has not been made public is, on a basic level, not insider trading. Contrary to popular belief, there is nothing illegal about trading on material, nonpublic data. Insider trading requires the trader to have a confidentiality agreement governing the data with the company, or to have a fiduciary duty to shareholders of the company. There are basically two situations in which trading on the vulnerability would be illegal insider trading: 1. You work for the company, or are a consultant engaged by the company, and you have knowledge of the vulnerability, or 2. You report the vulnerability to the company as an outsider and, in the process, enter into a confidentiality agreement. Regarding scenario 2, merely reporting a vulnerability wouldn’t cut it. If you report the vulnerability through a channel that requires you to accept a confidentiality agreement as part of the terms and conditions of reporting (such as a bug bounty platform, like Hackerone or BugCrowd), then you can’t trade on it. On the other hand, if you report the vulnerability through a channel with no constraints, such as to a security@ email address, you have no confidentiality agreement.
- dsl 9y ago
  3. The vulnerability is not real, or you intentionally overstate the impact publicly. Not insider trading, but definitely worthy of SEC inquiry. It's like a short position pump-and-dump.
cbsmith 9y ago
It becomes illegal when you misrepresent facts in order to manipulate an equity, though that's not insider trading.

toomuchtodo 9y ago

It's not against the law to trade on a zero day you discover and either fail to report, or report rapidly with no warning to the target.

emn13 9y ago
That can be illegal - it's market manipulation (specifically, stock bashing). It'll almost certainly depend on the details. (IANAL, and I'm not sure this is ever prosecuted).

chrismorgan 9y ago

See also https://news.ycombinator.com/item?id=16579314 https://news.ycombinator.com/item?id=16579314 on the Viceroy paper with some details confirming that that writeup was indeed ready to print.

aepiepaey 9y ago

Here's a piece on Viceroy: https://www.moneyweb.co.za/in-depth/investigations/viceroy-unmasked/ https://www.moneyweb.co.za/in-depth/investigations/viceroy-u...