4 ms·

How did the SEC figure this out? Do they monitor the accounts of all financial employees' relatives?

advisedwang 6y ago
The 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 ago
  It 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 ago
Re: 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 ago
  I 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 ago
They 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 ago
I'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.

The 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 ago
It 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 ago

Re: 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 ago
I 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 ago

They 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 ago

I'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.