12 ms·
The allegation: > ..A former IT administrator then at Palo Alto Networks Inc., was at the center of the trading ring, using his IT credentials and work contact
by lioeters 7y ago
The allegation:
> ..A former IT administrator then at Palo Alto Networks Inc., was at the center of the trading ring, using his IT credentials and work contacts to obtain highly confidential information about his employer’s quarterly earnings and financial performance.
How they were caught:
> This case highlights [SEC's] use of enhanced data analysis tools to spot suspicious trading patterns and identify the traders behind them.
Total estimated profit from this scheme, between 2015~17:
> Defendants’ trades in advance of the announcement generated profits that exceeded $3 million.
EDIT: Oops, I found this line from the same source: "At the peak of their scheme in 2017, [the defendants] achieved more than $7 million in illegal trading profits."
(Source: https://www.sec.gov/litigation/complaints/2019/comp-pr2019-261.pdf https://www.sec.gov/litigation/complaints/2019/comp-pr2019-2...)
- Aaronstotle 7y agoFeel like they were trying to get caught, communicating over text/email for insider trading isn't the brightest move. Then again, criminals usually aren't the smartest.
- orf 7y ago> criminals usually aren’t the smartest Selection bias.
- tradertef 7y agoI was thinking exactly the same thing. I wonder how much is being made using insider trading and never got caught.
- everdev 7y agoAnyone who consistently outperforms the market is a good candidate. My guess is if you're beating the market you're keeping it to yourself or a few high net worth clients.
- imglorp 7y agoSounds like playing in a casino. They're cool with it until you win too much.
- everdev 7y agoExactly. And to further the analogy it's challenging to tell the difference between investing and gambling.
- arthurcolle 7y agoJames Simons?
- shagbag 7y agoSimons doesn't do insider trading. Arguably he paid long term capital gains on a basket that should have been short term capital gains. But his system of short term, automated, stat arb / signal detection based trades are clearly not based on classified corporate data. I suggest you read The Man Who Solved the Market for more info.
- deleted 7y ago[deleted]
- harry8 7y agoWell you don't know that, it's Simon's assertion that he doesn't do insider trading and whether you or I believe him (and I do, fwiw) stating that he doesn't as an incontravertable fact is going too far. "There's zero evidence that Simons and Renaissance do any insider trading." Is a better way to state it.
- shagbag 7y agoSimons is pretty reclusive, I don't think he's actually made an assertion about insider trading. Either way, you're right that I don't know for sure. But all evidence points to a system that runs in a mostly automated manner, which would be the opposite of what you'd expect from an insider trader. Someone who makes "gutsy calls" based on "intuition" like Steve Cohen is what I think most successful insider traders would look like.
- seriesf 7y agoThe president of the United States engages in insider trading regularly, right in front of the whole world, on Twitter. We just don’t know who is getting the payoff.
- bananabreakfast 7y agoWhy is this downvoted? This is an openly true fact. The president literally tweets about the China trade deal to manipulate the market up and down. On top of that, the president and all of congress literally cannot be convicted of any crime while in office and they pretty much all engage in massive and rampant insider trading.
- samdoidge 7y agoWhere's the evidence?
- croon 7y agohttps://en.wikipedia.org/wiki/Volfefe_index https://en.wikipedia.org/wiki/Volfefe_index Or one out of tons of specific companies: https://www.washingtonpost.com/news/the-fix/wp/2016/12/06/did-donald-trump-tank-boeings-stock-because-he-was-mad-about-a-news-article/ https://www.washingtonpost.com/news/the-fix/wp/2016/12/06/di...
- datashow 7y agoI'm confused. Influencing the market is the same as insider trading?
- dboreham 7y agoThe accusation is that someone else is doing the insider trading based on prior knowledge of the tweet content.
- datashow 7y agoThe accusation: "The president of the United States engages in insider trading regularly, right in front of the whole world, on Twitter. " And "Why is this downvoted? This is an openly true fact." Apparently, they equal influencing the market to insider trading.
- malux85 7y agoAh, most of it? You know that dark pools of communication exist too right? They even have code words for the names of well known insider traders, e.g. Jacob Rees-Mogg, the UK politician is known as the “profiteering ghoul” because his massive short on the pound, why else was he pushing Brexit so much? The will of the people? Get real Which makes sense, do you think that given the financial amounts involved, and the only thing stopping most people is ethics (and knowledge that it’s illegal but easy to get away with) that it wouldn’t happen??
- fortydegrees 7y agoSuper interesting. Where is the best place to find out about JRM and the evidence that he does this?
- malux85 7y agoI just told you, the communication dark pools. It’s not open to the public, you need a shibboleth
- jl6 7y agoAnd you found out about it how?
- thaumasiotes 7y agoThe idea that there are groups of people communicating with each other privately doesn't really need a lot of evidence. It's 100% likely to be true. A better question would be "why do you think these specific people are coordinating with each other?".
- coralreef 7y agoIt's 100% likely to be true. Uhh citation required
- MiroF 7y agoMy guess is very common. Even if you just look at stocks before a major announcement, they usually start trading in the right direction a few hours before the announcement.
- icedchai 7y agoThis cracks me up because of all the times I've seen that NOT happen. The stock drops actually drops big time after the announcement. Sometimes the news is "good" but doesn't meet expectations, so the stock drops. Maybe it was already priced in. Sometimes the news is "bad", but better than expected, so the stock goes up. Maybe that was already priced in, too. Either way "just looking at stocks before a major announcement" isn't going to get you anywhere fast.
- thepete2 7y agoabsolutely, you never hear about the successful ones
- TheSpiceIsLife 7y agoNot specifically, no. But organised crime is an ongoing concern.
- aishvar 7y ago> criminals usually aren't the smartest. Well, the ones getting caught definitely aren't.
- ct520 7y agoLOL I agree. I would expect a message board tied to entrepreneurship to have it fair share of risk takers. Maybe tech is different but most if not all the self made people I know uh were not always so squeaky clean, just good at not getting caught.
- WheelsAtLarge 7y agoSuccessful entrepreneurs break the rules all the time. They just make sure they are not the type that will send them to jail. The perfect examples are Uber and Facebook. I'm sure their founders broke the rules left and right, and we've all read about some of the cases, as they grew their startups. The difference is that they were sure not to break the ones that got them in legal trouble.
- TeMPOraL 7y agoKind of. Uber's a bad example - that company turned breaking the law into a business model, using investment money to move fast and keep the lawmen at bay.
- ct520 7y agoIMO I agree with your statement but I would not say they just make sure they are not the type that will send them to jail. More along the lines as - when they do take a risk that could line them in jail they are more prepared / smarter then the average criminal and avoid jail. (Civil lawsuits more likely)
- seansmccullough 7y agohttps://www.google.com/amp/s/www.bloomberg.com/amp/opinion/articles/2018-08-12/the-10-laws-of-insider-trading https://www.google.com/amp/s/www.bloomberg.com/amp/opinion/a... It’s one of Matt Levine’s satirical rules of insider trading not to do that.
- eps 7y agoThe original link, sans the Google junk - https://www.bloomberg.com/amp/opinion/articles/2018-08-12/the-10-laws-of-insider-trading https://www.bloomberg.com/amp/opinion/articles/2018-08-12/th...
- seansmccullough 7y agoSorry, I was on mobile.
- NDizzle 7y agoPrison, baby!
- webkike 7y agoOnly $3 million from 2 years of insider trading? They weren't doing this very well.
- throwawaymath 7y agoActually, that's exceptionally good performance. You'd be surprised how hard it is to profit consistently even when you have advance knowledge of material earnings results. The market is fickle and lossy, and fundamental analysis is only is only one component of what the most sophisticated trading strategies do. I used to develop and sell novel earnings forecasts which would outperform analyst consensus. Typically my research would have a <1% margin of error on forecasting a specific KPI directly relevant to corporate revenue and profit for an equity. The best hedge funds were able to successfully trade on this information because they combined it with a significant amount of complementary data. But I would not want to develop a trading strategy based on that data alone. These guys did very well considering the information they had to work with and how primitive trading earnings is. The real money in insider trading is in more illiquid OTC markets, or in mergers/acquisitions.
- arkadiyt 7y agoChloe Xie published a research paper [1] on exactly the topic of how hard it is to profit despite advance knowledge of earnings results. It was summarized by Matt Levine in his aptly titled "Knowing the Future Isn’t That Helpful" [2]. [1]: http://chloexie.com/pdf/ChloeXie_JMP.pdf http://chloexie.com/pdf/ChloeXie_JMP.pdf [2]: https://www.bloomberg.com/opinion/articles/2019-11-26/knowing-the-future-isn-t-that-helpful https://www.bloomberg.com/opinion/articles/2019-11-26/knowin...
- ENOTTY 7y agoI also highly recommend playing the insider trading video game https://insider-trading-game.netlify.com/ https://insider-trading-game.netlify.com/
- 7y ago
- djrogers 7y ago> Total estimated profit from this scheme, between 2015~17: > Defendants’ trades in advance of the announcement generated profits that exceeded $3 million. That was actually just the take from one earnings announcement, not the entire scheme. It says elsewhere they cleared $7m in the first year.
- vkou 7y agoOpening a trading account, putting a bunch of money into it, and naked-short-selling a single company's stock right before the release of disastrous earnings sets off so many alarm bells at the SEC, that you'd have to be an absolute idiot to do it. Fortunately, the world has never had a shortage of idiots.
- larnmar 7y agoThe best way to cover your tracks would be to post about it in advance on /r/wallstreetbets so that you look like just another YOLOing idiot.
- rolltiide 7y agoeh you can do a lot with erroneous trading patterns for weeks/months before your big trades but if you work for the same company its best not to do the trade at all instead of looking for an 8% move, just get the 2% move in the ETF that the company is part of. there is a prohibition that extends to derived or linked securities, but this is much harder to detect and prove. its just ammunition without a weapon but really, better to play the sector as a whole. if I worked for Expedia and saw what affected their earnings, I would trade Priceline expecting exposure to the same trends.