5 ms·

Honestly, who thinks they can get away with moronically obvious insider trading like this? "Oh, I know, I'll take large positions right before this reporter pub

Honestly, who thinks they can get away with moronically obvious insider trading like this? "Oh, I know, I'll take large positions right before this reporter publishes MNPI, and I'll do it five times". Obviously you are going to get caught!

onetimemanytime 6y ago
do you think 100% of them get caught?
- vmception 6y ago
  this is a pretty reliable way to get caught brokers and all licensed financial firms are essentially deputized to freeze and enforce this stuff on behalf of the regulator, who then has time to get a emergency asset freeze rubber stamped by an "administrator law judge" who basically works on staff at the regulatory agency then you can prove why you aren't guilty by retaining a good lawyer with all that other money you have which isn't frozen, you have that right? the better way is to use a bot to execute the trades right after publication, or do it manually and lose a little bit of alpha. but he didn't.
- lordnacho 6y ago
  The ones who do it this way, yes. Maybe I'm reading it wrong, but it looks like he bought the stocks shortly before and then sold shortly after. That's going to show up in a simple search, and there's not a lot of alternative explanations for it.
  - p1necone 6y ago
    Statistically on any stock with a large trading volume there's pretty much always going to be someone who bought up right before a big announcement purely by chance, realized they got lucky and sold immediately afterwards. It's not obvious to me how you'd separate this from intentional trading on insider information. (Unless you just investigate everyone).
    - lordnacho 6y ago
      You'll find that even on some fairly large names there isn't all that much activity during the day. There's a lot of names, and there's a lot of trading in the auctions, so the total volume in the market won't result in a steady flow for a particular share. My guess is it will stick out like a sore thumb if you buy x shares right before an announcement and sell x right after. Especially if you do nothing else. Pretty much as soon as you've exited a second announcement-trade red lights should be flashing.
    - dasudasu 6y ago
      They don't prosecute for a random one off. It's always people that have done it multiple times, so they establish a pattern.
      - hansvm 6y ago
        Some napkin math suggests that there are enough retail trades (8.1M/day) that under some weak constraints (most are for short-term positions, higher market cap stocks are more likely to be purchased) you're still quite likely to find a few people who have "established a pattern" quite by accident. As long as they're just investigating and not necessarily prosecuting every event that probably sounds fine (I'd be curious to know what the prosecution "funnel" looks like for flagged individuals in real life -- 100%? 1%?), but it's important not to let an intuitive sense for things that are definitely too unlikely to happen by chance to cloud our judgement and create something like another Sally Clark event[0]. [0] https://en.wikipedia.org/wiki/Sally_Clark https://en.wikipedia.org/wiki/Sally_Clark
jbritton 6y ago
I maybe wrong, but I was under the impression that trades are essentially anonymous unless they are for a significant percentage of the stock.
- esoterica 6y ago
  They are anonymous to other participants, not the SEC
- WJW 6y ago
  It really depends on what you are trading. For example the prototype of a "dumb" insider trade is getting OTM call options when you know a company is getting a blowout quarter. Large amounts of OTM options trading in a stock that rarely sees much options activity is quite noticeable. When the authorities notice those, they can (and do) find out who got into that position simply by calling all the registered brokers and asking them who did it. (With a court order if need be, because suspicious options activity just before large jumps in stock price is reasonable suspicion of insider trading)
- elliekelly 6y ago
  Any time there’s a big swing the SEC requests data for transactions before and after. The time period of their requests vary but sometimes they ask for transactions months in advance to look for unusual patterns of activity. Insider trading is a particularly stupid move because it’s only a matter of time before you get caught.
- ABeeSea 6y ago
  The FINRA database available to regulators is an amazing engineering achievement. It knows all and is how the SEC is able to “replay” the markets after the fact. Four year old blog post, but gives a sense of scale: https://aws.amazon.com/blogs/publicsector/analytics-without-limits-finras-scalable-and-secure-big-data-architecture-part-1/ https://aws.amazon.com/blogs/publicsector/analytics-without-...
- jbritton 6y ago
  I once bought stock in EBIX. Not too long after I purchased I woke up one day to find the stock down 50%. An anonymous poster on Seeking Alpha had written an article claiming massive accounting fraud at EBIX. There was massive short selling that morning. After following forums and news on EBIX it appeared that there likely was not fraud. The stock would slowly recover, and then another hit piece followed by short selling would massively drop the stock again. This went on for a couple years. There never was any fraud. I sold the stock and swore off buying individual stocks. I’m 100% convinced there was illegal trading activity. Many people in the forums wrote to the SEC about it. The SEC never did anything. It also seemed like this goes on all the time.
fossuser 6y ago
A friend was riding on the tube in the financial district of London and overheard one finance guy explaining to new colleague that the trick to getting good trades was to make friends at companies and learn about new things from them before everyone else knows. Yeah - this is one stupid example, but if people are saying this kind of thing in a relatively public place as instruction it's probably happening everywhere all the time. You can usually see it in stock trends before some event happens.
- deleted 6y ago
  [deleted]
coliveira 6y ago
Not all crime is sophisticated as you imagine. Most criminals do the first thing that comes to their minds. If they were highly skilled they wouldn't be committing crimes in the first place.
colechristensen 6y ago
Lots of people. Financial crime isn't prosecuted very aggressively, basically unless it is a slam dunk easy case, evidence is ignored.

onetimemanytime 6y ago

do you think 100% of them get caught?

vmception 6y ago
this is a pretty reliable way to get caught brokers and all licensed financial firms are essentially deputized to freeze and enforce this stuff on behalf of the regulator, who then has time to get a emergency asset freeze rubber stamped by an "administrator law judge" who basically works on staff at the regulatory agency then you can prove why you aren't guilty by retaining a good lawyer with all that other money you have which isn't frozen, you have that right? the better way is to use a bot to execute the trades right after publication, or do it manually and lose a little bit of alpha. but he didn't.
lordnacho 6y ago
The ones who do it this way, yes. Maybe I'm reading it wrong, but it looks like he bought the stocks shortly before and then sold shortly after. That's going to show up in a simple search, and there's not a lot of alternative explanations for it.
- p1necone 6y ago
  Statistically on any stock with a large trading volume there's pretty much always going to be someone who bought up right before a big announcement purely by chance, realized they got lucky and sold immediately afterwards. It's not obvious to me how you'd separate this from intentional trading on insider information. (Unless you just investigate everyone).
  - lordnacho 6y ago
    You'll find that even on some fairly large names there isn't all that much activity during the day. There's a lot of names, and there's a lot of trading in the auctions, so the total volume in the market won't result in a steady flow for a particular share. My guess is it will stick out like a sore thumb if you buy x shares right before an announcement and sell x right after. Especially if you do nothing else. Pretty much as soon as you've exited a second announcement-trade red lights should be flashing.
  - dasudasu 6y ago
    They don't prosecute for a random one off. It's always people that have done it multiple times, so they establish a pattern.
    - hansvm 6y ago
      Some napkin math suggests that there are enough retail trades (8.1M/day) that under some weak constraints (most are for short-term positions, higher market cap stocks are more likely to be purchased) you're still quite likely to find a few people who have "established a pattern" quite by accident. As long as they're just investigating and not necessarily prosecuting every event that probably sounds fine (I'd be curious to know what the prosecution "funnel" looks like for flagged individuals in real life -- 100%? 1%?), but it's important not to let an intuitive sense for things that are definitely too unlikely to happen by chance to cloud our judgement and create something like another Sally Clark event[0]. [0] https://en.wikipedia.org/wiki/Sally_Clark https://en.wikipedia.org/wiki/Sally_Clark

jbritton 6y ago

I maybe wrong, but I was under the impression that trades are essentially anonymous unless they are for a significant percentage of the stock.

esoterica 6y ago
They are anonymous to other participants, not the SEC
WJW 6y ago
It really depends on what you are trading. For example the prototype of a "dumb" insider trade is getting OTM call options when you know a company is getting a blowout quarter. Large amounts of OTM options trading in a stock that rarely sees much options activity is quite noticeable. When the authorities notice those, they can (and do) find out who got into that position simply by calling all the registered brokers and asking them who did it. (With a court order if need be, because suspicious options activity just before large jumps in stock price is reasonable suspicion of insider trading)
elliekelly 6y ago
Any time there’s a big swing the SEC requests data for transactions before and after. The time period of their requests vary but sometimes they ask for transactions months in advance to look for unusual patterns of activity. Insider trading is a particularly stupid move because it’s only a matter of time before you get caught.
ABeeSea 6y ago
The FINRA database available to regulators is an amazing engineering achievement. It knows all and is how the SEC is able to “replay” the markets after the fact. Four year old blog post, but gives a sense of scale: https://aws.amazon.com/blogs/publicsector/analytics-without-limits-finras-scalable-and-secure-big-data-architecture-part-1/ https://aws.amazon.com/blogs/publicsector/analytics-without-...
jbritton 6y ago
I once bought stock in EBIX. Not too long after I purchased I woke up one day to find the stock down 50%. An anonymous poster on Seeking Alpha had written an article claiming massive accounting fraud at EBIX. There was massive short selling that morning. After following forums and news on EBIX it appeared that there likely was not fraud. The stock would slowly recover, and then another hit piece followed by short selling would massively drop the stock again. This went on for a couple years. There never was any fraud. I sold the stock and swore off buying individual stocks. I’m 100% convinced there was illegal trading activity. Many people in the forums wrote to the SEC about it. The SEC never did anything. It also seemed like this goes on all the time.

fossuser 6y ago

A friend was riding on the tube in the financial district of London and overheard one finance guy explaining to new colleague that the trick to getting good trades was to make friends at companies and learn about new things from them before everyone else knows. Yeah - this is one stupid example, but if people are saying this kind of thing in a relatively public place as instruction it's probably happening everywhere all the time. You can usually see it in stock trends before some event happens.

deleted 6y ago
[deleted]

coliveira 6y ago

Not all crime is sophisticated as you imagine. Most criminals do the first thing that comes to their minds. If they were highly skilled they wouldn't be committing crimes in the first place.

colechristensen 6y ago

Lots of people. Financial crime isn't prosecuted very aggressively, basically unless it is a slam dunk easy case, evidence is ignored.