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SEC charges former Amazon finance manager and family with insider trading
- curiousgal 6y agoHow did the SEC figure this out? Do they monitor the accounts of all financial employees' relatives?
- advisedwang 6y agoThe complaint [1] includes quotes from the brokerage and from Amazon. Possibly either Amazon or the brokerage flagged this. [1] https://www.sec.gov/litigation/complaints/2020/comp-pr2020-228.pdf https://www.sec.gov/litigation/complaints/2020/comp-pr2020-2...
- itake 6y agoIt seemed like they were very public with the brokerage about how the amazon employee controlled his family's brokerage accounts to make amazon trades.
- quickthrowman 6y agoRe: SEC, Brokerages ask if you’re related to an officer/director/10%+ owner of a publicly-traded company when you open an account. I don’t think they actively monitor these people, but they’ll be looked at if there’s unusual trading activity. Usually what happens in these cases is accounts with no/little activity suddenly have unusual options trading activity, like buying way OTM weekly calls that always profit. These transactions get flagged and reviewed and if they notice a pattern with names or something, it’s not that hard for them to put the pieces together.
- refurb 6y agoI would assume it's exactly this. You just filter down trade to those accounts that have either never purchases options in the past, or brand new accounts where that's the first trade AND where the options were highly profitable. Basically really unlikely investing scenarios.
- smabie 6y agoThey can't catch you unless you're a total idiot. Buying a bunch of short dated OTM options that no one else even wants using an account that rarely trades options was probably the dead giveaway.
- yodon 6y agoI'm guessing they look for accounts that suddenly start making a series of extremely profitable short term investments in a particular stock, then notice a bunch of linked accounts (having a history of transfers between each other) also suddenly making the same series of extremely profitable trades and only profitable trades. That's a red flag. After raising that red flag it wouldn't take a rocket scientist to notice the other linked account in the set that has made zero trades but receives a regular monthly paycheck direct deposit from the company in question. Most people only try to commit major fraud once, and hence aren't very experienced at doing it. The IRS and SEC encounter major fraud constantly, and hence are very experienced at spotting it. Scale favors the regulator when it comes to automated detection tools.
- mrich 6y agoThat's pocket change compared to some of the other things going on out there the SEC does not even investigate.
- mdoms 6y agoThanks for your input.
- celticninja 6y agoThese are show prosecutions. The really big frauds have been going on so long that the SEC will look foolish if they bring them down. This is just showing that they are doing something.
- smabie 6y agoToo bad Matt Levine is out, I'm sure he would have a good time talking about just how terrible an idea this was. I assume these fools went with the classic "buy a shit ton of illiquid and thinly traded OTM options" route.
- boulos 6y agoSee my quotes from the complaint. They definitely seemed to have transacted a lot, made a decent amount of money, but they mustn’t have been that out of the money (they put in like $800k to make another $600k, so they probably traded in the money but with upside).
- Topgamer7 6y ago1.4M in profits? Doesn't that seem like chump change? Like if you had insider information couldn't you buy options a make much more? Assuming your info was guaranteed to play out predictably. And if it wasn't is it really any better than general speculation?
- mikestew 6y agoAh, the Bohra family was smart, you see. If they only traded out-of-the-money options, and only in “small” amounts, the SEC computers (which have nothing better to do all day...) will never catch on!
- raincom 6y agoVery interesting observation. Large number of short term OTM options are flagged when they become in-money.
- bredren 6y agoPeople do really dumb things for relatively small amounts of money. Look up examples of corruption in US city administrators. You’ll see people who throw away their career over $30k.
- paulmendoza 6y agoWhat you don’t see are all the other shady things they did. How often do people get caught the first time?
- timack 6y agoMartha Stewart was jailed for avoiding a loss of ~$45k USD.
- ponker 6y agoWith a net worth of over $300 million.
- notional 6y agoAs alleged, the family reaped illicit profits of approximately $1.4 million from their unlawful trading in Amazon securities. Did anyone really need insider information to know Amazon stock was going to rise? Although $1.4 million is life changing amount of money, I feel like for these people who were already being generously compensated in Amazon stock, it probably wasn't worth the risk, especially given the quote below. Laksha Bohra, the SEC’s civil complaint alleged, ignored numerous reminders from Amazon not to divulge confidential financial information or to illegally trade in the company’s securities based on what she knew about the company’s financial position — even after a former colleague pleaded guilty to insider trading in 2017, earning him six months in prison. [1] [1] https://www.seattletimes.com/business/amazon/feds-charge-seattle-area-amazon-employee-with-insider-trading/ https://www.seattletimes.com/business/amazon/feds-charge-sea...
- mdoms 6y ago> Did anyone really need insider information to know Amazon stock was going to rise? Did you invest? Did everyone you know invest? Did you time it as well as the alleged offender?
- notional 6y agoDid I invest? Yes, my compensation was in part Amazon stock. Pretty much everyone I knew also invested. What is timing if you don't plan to sell short term? As far as I can tell, this charge is about buying not selling stock.
- celticninja 6y agoIt's about buying it with insider knowledge that the quarterly earnings call would be positive and lead to a rise in price. So the intent is to sell that stock when you know the price has gone up to guarantee a return. The issue is the knowledge they used to make that decision was not public record.
- shitlord 6y agoAmazon generally doesn't allow employees to purchase AMZN options.
- coliveira 6y agoIt is funny that high management is never considered to be doing illegal insider trading (except for obvious missteps), but they're the ones responsible for capital allocation, stock/option grants, and all kinds of decisions that will impact financial results in the next quarter.
- justchilly 6y agoAnd their trades are typically scheduled in advance and public. Their job and fiduciary duty is to maximize shareholder value, and they make decisions so that happens. If that means allocating $ and rewarding people that will attain that goal, then what should be considered illegal?
- coliveira 6y agoThere is an obvious conflict of interest between the long term stability of the business and the actions necessary for the huge stock/options grants become profitable in the next few quarters. For example, when mergers and acquisitions should be approved, layoffs be announced, dividends increased, etc.
- deleted 6y ago[deleted]
- Gibbon1 6y agoAll the real money is in quid pro quo's.
- IncRnd 6y agoThis was just on HN the other day. Adam Rogas, who abruptly resigned from NS8 earlier this month, is accused of misleading investors who poured in $123 million to his company earlier this year, a deal in which he allegedly pocketed more than $17 million. CEO of Cyber Fraud Startup NS8 Arrested by FBI, Facing Fraud Charges - https://news.ycombinator.com/item?id=24518097 https://news.ycombinator.com/item?id=24518097 It wasn't insider trading, but it was financial fraud by a ceo.
- jakupovic 6y ago$1.4MM that's all they could eke out of it, pitiful performance.
- ponker 6y agoThe ones who eke out $1400m get museums named after them. The failure here is to make enough to buy an ownership interest in the law.
- ozten 6y agoHow often is jail time included in these types of cases? If they merely lost their profits, this isn't much of a punishment.
- flak48 6y agoThe article mentions that they were asked to pay just under twice their profit (2 * $1.4 million)
- ozten 6y agoI would not do this, because it is unethical. However, if there is a 5% chance you will get caught and lose 230% your profit margin, seems like a rational agent would do insider trading at every opportunity.
- srtjstjsj 6y agoAnd they probably do, until they get caught.
- kmc059000 6y agoI imagine if you get caught once, the SEC is going to audit everything you've done and find most occurrences of insider training. Theres a 5% chance for each of those occurrences and you're going to owe a lot if any are found.
- kube-system 6y agoThere's also the $118,406 in interest, and $1,106,399 in penalties.
- SomewhatLikely 6y agoFrom the article: > In a parallel action, the U.S. Attorney's Office for the Western District of Washington today filed criminal charges against Viky Bohra.
- eel 6y ago> On January 15, 2018, Bohra used her work computer to search Google for “AMZN.” How does the SEC know this? Is it most likely browser history? Google account history? Corporate monitoring software?
- kache_ 6y agoAmazon probably had to comply with giving up the corporate monitoring data most likely.
- asdfasgasdgasdg 6y agoProbably complied gladly. They don't want folks insider trading either.
- filmgirlcw 6y agoNot only that but if she’s in finance, the monitoring requirements for what you do on work machines is even higher. And as a child comment said, Amazon complied willingly. Nothing forced at all. It doesn’t want insider-trading either.
- fnord77 6y agothe search query would be TLS encrypted. Amazon snoopware wouldn't be able to see it
- sillysaurusx 6y agoSnoopware is often installed on the laptop itself, not merely listening in the middle.
- mimsee 6y agobypassed by a TLS cert installed by employer. also not that hard for amazon to develop a browser extension and force feed it through group policy
- filmgirlcw 6y agoShe worked in finance...I’m sure every single keystroke was logged in addition to any TLS bypasses.
- boulos 6y agoFrom the complaint, it was OTM calls and puts, but it seemed like they were trying to decide how much to go in. > 42. Prior to the completion of Bohra’s initial review, her Husband had purchased 500 Amazon shares in put options in his account on January 8. These put options had an expiration date of February 16, 2018, and they represented his expectation that Amazon’s stock price would fall by that date. > 48. During this same period, Bohra’s Husband sold the put options that were held in his account and instead purchased both Amazon common stock and Amazon call options in his account as well as accounts belonging to Bohra’s Father-in-Law and Bohra’s Mother-in-Law, now betting that Amazon’s stock price would increase. > On the morning of January 22, 2018, Bohra’s Husband again logged in from his home and sold the 500 Amazon shares in put options that were in his account and replaced them with a purchase of 1,000 Amazon shares in call options. That afternoon, Bohra’s Husband logged in from his workplace to purchase 4,000 Amazon shares in call options in his account; 2,000 Amazon shares in the same call options in one of Bohra’s Mother-in-Law’s accounts; 1,000 Amazon shares in the same call options in another of Bohra’s Mother-in-Law’s account and 1,000 Amazon shares in the same call options in Bohra’s Father-in-Law’s account. The call options purchased that afternoon had the same strike price and expiration date. > 51. Over the next few days, Bohra’s Husband and Bohra’s Father-in-Law continued to purchase Amazon common stock and call options, selling call options they had purchased on January 22 and 23 and replacing them with new call options at higher strike prices that they purchased on January 24, 25, and 26, and on February 1. > 53. By the time that Amazon’s fourth fiscal quarter and year end 2017 earnings was 11 announced on February 1, 2018, Bohra’s Husband and Bohra’s Father-in-Law had spent more than $850,000 on purchasing Amazon call options and common stock in order to trade, at least in part, based on the material nonpublic information that Bohra had provided. > 56. On February 1, 2018, after the market closed, Amazon announced its fourth fiscal quarter and year end 2017 earnings. The next day, February 2, 2018, Amazon’s stock price increased 2.87% over the prior day’s closing price. > 58. In total, accounts belonging to Bohra’s Husband, her Father-in-Law, and her 10 Mother-in-Law made a profit of approximately $664,000 by trading Amazon common stock and Amazon call options ahead of Amazon’s fourth fiscal quarter and year end 2017 earnings announcement.
- gavinray 6y ago> Bohra’s Husband and Bohra’s Father-in-Law had spent more than $850,000 on purchasing Amazon call options and common stock in order to trade > Amazon’s stock price increased 2.87% over the prior day’s closing price. > In total, accounts belonging to Bohra’s Husband, her Father-in-Law, and her 10 Mother-in-Law made a profit of approximately $664,000 Am I stupid? $850,000 * 1.0287 = $874,395, which is $24,395 profit. Where are the other ~$640,000 coming from?
- Whymess 6y ago“The older I get the more I realize how many kinds of smart there are. There are a lot of kinds of smart. There are a lot of kinds of stupid, too.” – Jeff Bezos
- woeirua 6y agoThis family will likely be ruined by these charges. Even if they successfully defend against these charges, the lawyer fees will wreck them financially. Meanwhile, Mr. Musk has literally gotten a slap on the wrist for multiple flagrant violations of securities law. There are definitely two justice systems in the US. The ultra-rich do not play by the same rules that you and I do.
- filmgirlcw 6y agoThis is absolutely true but let’s not pretend this family didn’t violate the law here either. Like, there should be a middle ground between “if you’re rich enough, you get away with anything” and “it’s acceptable for a person in finance to share insider information with family members so they can profit.”
- bargl 6y ago>let’s not pretend this family didn’t violate the law here either. No actually, let's do pretend this family didn't violate the law here. Let's assume that allegedly means just that. We have this crazy double standard in the US, we want to assume the police are incompetent, but then when they accuse someone we assume they are guilty. How about we assume this is a competent accusation that may or may not be factual, and leave it to the courts to decide. Whether or not we believe the court system needs reform to make it more affordable/just is a valid point, but let's assume that by reading the Cliff's Notes (press release) of this case we don't know enough to decide guilt. Edit: Courts should be affordable and just for all. I believe paying more shouldn't get you special treatment and not being able to pay shouldn't get you harsher judgements. The difficulty is in finding that balance. Edit 2: Well shit I was wrong, I missed the part where they agreed to the charges? Not sure how that works, beyond my limited knowledge on the law, but.... it looks like they plead guilty.
- vlovich123 6y agoReading the linked press release answers your question. > The SEC's complaint, filed in federal court in Seattle, charges all three Bohras with violating antifraud provisions of the federal securities laws. All three Bohras have consented to the entry of final judgments permanently enjoining them from further violations of the charged provisions, and ordering them to pay total disgorgement of $1,428,094, total prejudgment interest of $118,406, and total penalties of $1,106,399. They've admitted guilt & culpability.
- boulos 6y agoFor those wondering “really, they had the Amazon earnings ahead of time and only made $1.4M?” this reminded me of a good Matt Levine writeup about a group of folks who obtained massive numbers of earnings reports ahead of time [1]. Having the clear knowledge of the earnings report doesn’t give you perfect knowledge on how to trade it / the reaction! > Their performance is statistically significantly greater than that of random choice. However, the difference is economically small. For example, only 31% of earnings announcements traded by the informed traders fell within the tail deciles. About 70% of their informed trades missed the biggest stock price return opportunities. They traded earnings announcements with an average absolute return of 5.15%. The average earnings announcement return in the tail deciles is 11.3% (median 9.2%). [1] https://www.bloomberg.com/amp/opinion/articles/2019-11-26/knowing-the-future-isn-t-that-helpful https://www.bloomberg.com/amp/opinion/articles/2019-11-26/kn...
- TeMPOraL 6y agoRemember the recent Twitter attack, where malicious actors were able to post from many high-profile & verified accounts? The attackers could've done just about anything. Moved stocks. Start World War 3. And all they did was try a cryptocurrency scam that netted them $couple-thousand.
- filmgirlcw 6y agoWell, that’s because it was literal children going after rare usernames who then pivoted to dumb crypto scams. Which reading this complaint, sounds like the same dumb criminal mindset as these people.
- t0mmyb0y 6y agoCrypto scams are not dumb. The people that send are dumb. It is the easiest scam to pull off and I used to do it. Post a page saying you double btc because you stole too much and people throw btc at you.
- boulos 6y agoMatt Levine again: https://mobile.twitter.com/matt_levine/status/1283503080978489344 https://mobile.twitter.com/matt_levine/status/12835030809784... :)
- hansdieter1337 6y agoPfff... beginners mistakes. There’s a TOR hidden service where you can trade insider information.
- syspec 6y agoThese kind of things just make me laugh, I mean the lifetime earning potential for someone in this persons position is so high, and they blew it to make a quick 1M. Reminds me of the Apple compliance lawyer busted for insider trading, I believe last year[0] https://www.google.com/amp/s/www.cnbc.com/amp/2019/10/24/apple-lawyer-indicted-for-insider-trading.html https://www.google.com/amp/s/www.cnbc.com/amp/2019/10/24/app...