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 bunc

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.