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Funnily enough, he actually covered this angle yesterday! Regular readers know that a major theme of this newsletter is Everything Is Securities Fraud, so in t
by hyperrail 8y ago
Funnily enough, he actually covered this angle yesterday!
Regular readers know that a major theme of this newsletter is Everything Is Securities Fraud, so in that vein, let us consider a hypothetical. What if:
1. Everything in the Businessweek story is true, Chinese spies planted hardware backdoors in computers built and used by major American companies, and the FBI investigated along with those companies and discovered the backdoors.
2. It is a national-security secret and the companies were instructed by the FBI never to acknowledge it.
3. The companies are patriotically but falsely denying the hack.
If that is true—and I have no particular reason to think it is, it’s just the sort of hypothetical we like around here—then, obvious question: Is it securities fraud? (Assuming that the hack is potentially material to the companies’ business?) I do not think that the securities laws explicitly allow companies to make false statements of material fact if required for national security, but you could see giving them a pass here.
https://www.bloomberg.com/view/articles/2018-10-04/computer-spies-hacked-reality https://www.bloomberg.com/view/articles/2018-10-04/computer-...
- hef19898 8y agoIt will definetly be bad for the business of these companies, especially for Amazon, as it undermines customer trust. In the case of Amazon also the most profitable division, AWS, which provided the majority of profits in 2017.
- cm2187 8y agoPushing the conspiracy theory just for the sake of argument. You could imagine that some employees have been in contact with the NSA about these chips and been told that they cannot disclose anything to their employers. The management of Apple would deny the claim in good faith. It would be hard to make a claim that Apple meant to mislead investors.