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A permanent injunction is a pretty big deal. I didn't want to spend the time finding the actual court filing corresponding to this press release, but 99% of th

A permanent injunction is a pretty big deal. I didn't want to spend the time finding the actual court filing corresponding to this press release, but 99% of the time, a "permanent injunction" in this context means a lifetime ban from the sale or offering of securities. Not such a big deal for the average Joe Sixpack, but in tech, where we're often paid in RSUs, options, and grants, it's a huge deal. Plus, there's the felony criminal record that will dissuade employers that aren't publicly traded.

donald123 8y ago
Isn't the settlement with SEC to avoid the criminal record? Besides it's supposed to be a civil charge by SEC.
- posixplz 8y ago
  You're right, my mistake. Insider trading can be charged criminally. To be precisely correct on this case, we'd need to read the plea filing. The defendant's name is also public record, so while a criminal record search may not ding him, a regular search engine query sure will. :)
  - 783629gasd 8y ago
    Yes insider trading can be charged criminally, but there's no actual statute prohibiting it, surprisingly: "For example, Section 16 of the Securities Exchange Act of 1934 requires the disgorgement of short-swing profits by named insiders—directors, officers, and 10% shareholders. The 1934 Act’s general antifraud provision, Section 10(b), is frequently used in the prosecution of insider traders. Although the statute does not specifically mention insider trading but, instead, forbids the use of “manipulative or deceptive” means in buying or selling securities, case law has made clear that insider trading is the type of fraud that is prohibited by Section 10(b)" (https://fas.org/sgp/crs/misc/RS21127.pdf https://fas.org/sgp/crs/misc/RS21127.pdf, emphasis added) In other words, everybody has just basically decided that insider trading is wrong and people should go to jail for doing it, and caselaw reflects that, but there's no actual statute in place anywhere.
    - laken 8y ago
      One of the reasons that there is no particular statue for insider trading is that it's difficult to say who the person who insider trades harmed.
      - adrr 8y ago
        The person on the other side of the trade. This would be the person who wrote the puts in this case and the entity harmed is more than likely the market maker for Equifax. If he just shorted the traditional way by borrowing and selling the stock, then its hard to argue who he harmed.
        rhizome 8y ago
        Plus the other stockholders
      - wahern 8y ago
        There are plenty of victimless crimes on the statute books. The dispute over who might be theoretically harmed by insider trading relates to the legal theories proposed by courts and the SEC to justify the prohibition. Who might be harmed is of particular concern, particularly in the criminal domain, because we're dealing with an agency-created rule, and the courts are more-or-less following common law methodologies for specifying and circumscribing the rule. The applicable common law domain is Torts, and in Tort law there needs to be a breach of a duty to someone. Only once you identify that person (or persons) can you understand the scope of the duty owed them and by whom. The two competing theories are (1) that insider trading violates a fiduciary duty to the company from which the information came or (2) that insider trading violates a duty to the public at large, the so-called Fraud on the Market theory. The Fraud on the Market theory is what the SEC still clings to, but courts won't buy it because it's just too broad and doesn't really comport with established common law principles. An important self-constraint to fashioning non-statutory law is limiting oneself to extending pre-existing legal principles. The legislature isn't constrained by arcane legal technicalities. Their only constraint is the Constitution, which doesn't necessarily require shoe-horning laws into theoretically consistent buckets. The Fraud on the Market theory is too distant from any pre-existing legal principle, too distant from the plaintext of the existing statutes[1], and so only the legislature should be allowed to explicitly promulgate such a rule. [1] This is why we're talking about common law principles and not more recent administrative law principles. These days courts probably would never have allowed an administrative agency to invent something like insider trading, particularly as a crime, and so wouldn't have needed to make recourse to foundational common law principles. The courts accepted the prohibition prior to the modern development of administrative law.
- JumpCrisscross 8y ago
  > Isn't the settlement with SEC to avoid the criminal record? No. The SEC is a civil agency which brings civil actions. Settling with the SEC does not prohibit the DoJ, or any state enforcement agency, from bringing criminal charges.
  - donald123 8y ago
    OK, make sense, just found out on the SEC website. So there won't be a criminal record before DOJ or local AGs place charges.
- pm90 8y ago
  Additionally, SEC can't bring criminal charges. That has to be done via the FBI.
- tawy1031 8y ago
  The SEC stuff was a civil action. They are being charged criminally by the state. From the article: > In a parallel proceeding, the U.S. Attorney’s Office for the Northern District of Georgia filed criminal charges against Bonthu.
frisco 8y ago
A "permanent injunction" just means "I promise not to do it again and will get in more trouble next time if I do," not that he can't be paid in options in the future.
- pille 8y ago
  Right, but I guess technically if he exercises the options, he’d own stock he could never sell? I know options are usually just cleared and pay out the difference if they’re in the money, but I don’t know if that’s how it’s seen legally.

donald123 8y ago

Isn't the settlement with SEC to avoid the criminal record? Besides it's supposed to be a civil charge by SEC.

posixplz 8y ago
You're right, my mistake. Insider trading can be charged criminally. To be precisely correct on this case, we'd need to read the plea filing. The defendant's name is also public record, so while a criminal record search may not ding him, a regular search engine query sure will. :)
- 783629gasd 8y ago
  Yes insider trading can be charged criminally, but there's no actual statute prohibiting it, surprisingly: "For example, Section 16 of the Securities Exchange Act of 1934 requires the disgorgement of short-swing profits by named insiders—directors, officers, and 10% shareholders. The 1934 Act’s general antifraud provision, Section 10(b), is frequently used in the prosecution of insider traders. Although the statute does not specifically mention insider trading but, instead, forbids the use of “manipulative or deceptive” means in buying or selling securities, case law has made clear that insider trading is the type of fraud that is prohibited by Section 10(b)" (https://fas.org/sgp/crs/misc/RS21127.pdf https://fas.org/sgp/crs/misc/RS21127.pdf, emphasis added) In other words, everybody has just basically decided that insider trading is wrong and people should go to jail for doing it, and caselaw reflects that, but there's no actual statute in place anywhere.
  - laken 8y ago
    One of the reasons that there is no particular statue for insider trading is that it's difficult to say who the person who insider trades harmed.
    - adrr 8y ago
      The person on the other side of the trade. This would be the person who wrote the puts in this case and the entity harmed is more than likely the market maker for Equifax. If he just shorted the traditional way by borrowing and selling the stock, then its hard to argue who he harmed.
      - rhizome 8y ago
        Plus the other stockholders
    - wahern 8y ago
      There are plenty of victimless crimes on the statute books. The dispute over who might be theoretically harmed by insider trading relates to the legal theories proposed by courts and the SEC to justify the prohibition. Who might be harmed is of particular concern, particularly in the criminal domain, because we're dealing with an agency-created rule, and the courts are more-or-less following common law methodologies for specifying and circumscribing the rule. The applicable common law domain is Torts, and in Tort law there needs to be a breach of a duty to someone. Only once you identify that person (or persons) can you understand the scope of the duty owed them and by whom. The two competing theories are (1) that insider trading violates a fiduciary duty to the company from which the information came or (2) that insider trading violates a duty to the public at large, the so-called Fraud on the Market theory. The Fraud on the Market theory is what the SEC still clings to, but courts won't buy it because it's just too broad and doesn't really comport with established common law principles. An important self-constraint to fashioning non-statutory law is limiting oneself to extending pre-existing legal principles. The legislature isn't constrained by arcane legal technicalities. Their only constraint is the Constitution, which doesn't necessarily require shoe-horning laws into theoretically consistent buckets. The Fraud on the Market theory is too distant from any pre-existing legal principle, too distant from the plaintext of the existing statutes[1], and so only the legislature should be allowed to explicitly promulgate such a rule. [1] This is why we're talking about common law principles and not more recent administrative law principles. These days courts probably would never have allowed an administrative agency to invent something like insider trading, particularly as a crime, and so wouldn't have needed to make recourse to foundational common law principles. The courts accepted the prohibition prior to the modern development of administrative law.
JumpCrisscross 8y ago
> Isn't the settlement with SEC to avoid the criminal record? No. The SEC is a civil agency which brings civil actions. Settling with the SEC does not prohibit the DoJ, or any state enforcement agency, from bringing criminal charges.
- donald123 8y ago
  OK, make sense, just found out on the SEC website. So there won't be a criminal record before DOJ or local AGs place charges.
pm90 8y ago
Additionally, SEC can't bring criminal charges. That has to be done via the FBI.
tawy1031 8y ago
The SEC stuff was a civil action. They are being charged criminally by the state. From the article: > In a parallel proceeding, the U.S. Attorney’s Office for the Northern District of Georgia filed criminal charges against Bonthu.

frisco 8y ago

A "permanent injunction" just means "I promise not to do it again and will get in more trouble next time if I do," not that he can't be paid in options in the future.

pille 8y ago
Right, but I guess technically if he exercises the options, he’d own stock he could never sell? I know options are usually just cleared and pay out the difference if they’re in the money, but I don’t know if that’s how it’s seen legally.