6 ms·

How does this even end up on the SEC or IRS radar? $1.4M seems like a blip in the grand scheme of things.

catillac 5y ago
I don’t know about IRS but SEC enforcement actions are largely driven by complaints from regular people. Perhaps the stock broker got suspicious and acted per their ethical duties, or perhaps one of them wasn’t as tight lipped as they would have needed to be.
- dboreham 5y ago
  Perhaps the husband and wife are not getting along so well now and one of them snitched on the other?
- travisjungroth 5y ago
  The initial insider trading analysis is automated. Dude traded in front of 11 straight earnings calls. That’s gonna get you put on a list.
- Mauricebranagh 5y ago
  Or maybe someone at amazon tipped the SEC off
ping_pong 5y ago
SEC targets regular people to keep us in line. They let big institutional traders and connected people go.
refurb 5y ago
I have no doubt the SEC has a bunch of rules they use to flag suspicious transactions. The data analysis spits out a few names and they follow up in person to see who lawyers up and who cracks under pressure. It's also why Matt Levine's "rules of insider trading" includes "Don’t do it by buying short-dated out-of-the-money call options on merger targets". Certain transactions are suspicious as hell, especially when they can look at your trading history and determine you've never really traded much and just opened the account 2 days prior and made a $100,000 bet on the trade. Or for the really clever people, they find out although you made a suspicious trade you don't work for Amazon, but LinkedIn says you're the wife of someone who works in finance there. Oops! Though I wonder if that rule needs to be updated with r/WSB doing these trades all the time. https://www.bloomberg.com/opinion/articles/2018-08-12/the-10-laws-of-insider-trading https://www.bloomberg.com/opinion/articles/2018-08-12/the-10...
- travisjungroth 5y ago
  Today’s Money Stuff was on exactly this. Under “Insider Trading”: https://www.bloomberg.com/opinion/articles/2021-06-10/maybe-gamestop-is-good-now https://www.bloomberg.com/opinion/articles/2021-06-10/maybe-...
  - refurb 5y ago
    Holy crap that's amazing. The FINRA list is an interesting approach. Nothing high tech, just put pressure on people who could have leaked. "In fact, when Hand was questioned by Neuralstem about Calice’s inclusion on a list of names that the Financial Industry Regulatory Authority sent to Neuralstem in its review of suspicious pre-Announcement trading, Hand falsely stated that Calice could not have obtained the negative clinical trial information from her." https://www.bloomberg.com/opinion/articles/2021-06-10/maybe-gamestop-is-good-now https://www.bloomberg.com/opinion/articles/2021-06-10/maybe-...
- dheera 5y ago
  I don't understand why "wife" has any legal bearing on this. What if it was a girlfriend? What if it was a friend? What if it was some random dude on reddit?
  - crazygringo 5y ago
    Well they're interested in all of those. But conveniently, there's a legal document that establishes a relationship with your spouse, so that's really easy to find. And so it's kind of an extra level of stupid for getting caught...
  - refurb 5y ago
    Lots of people who do insider trading think "if I don't do it then I won't get caught. I'll just have my [wife, dad, brother, cousin, mother-in-law] do the trade and the SEC will never figure it out".
  - viraptor 5y ago
    Because (excluding some explicit agreements where they're legal), you share finances with your wife, so if you get money, so does your wife. Possibly the same with your girlfriend. A friend or random dude on reddit would need a proven connection.
omegaham 5y ago
It's really easy to look for trades before significant stock jumps. In this case, he made profitable trades before 11 straight earnings announcements. I'm sure their analysis flagged his trades, and then when they found out that his wife works at Amazon, they declared, "I choose you, Pikachu!"
- midnightclubbed 5y ago
  His wife was probably already flagged on the SEC system as having access to Amazon financials. It seems fairly likely the trades were marked as potentially suspicious and once the volume hit some threshold they were escalated to a human investigator. My wife has a series 7 security trading license. The SEC requires our personal trading accounts be flagged with this information along with information regarding my employer. Any trades I make in my employer's stock take additional processing time (along with standard blackout periods etc). I would assume people with restricted access to corporate financial statements are flagged and tracked similarly by the SEC.
seanmcdirmid 5y ago
Low hanging fruit. These kind of trading activities are almost super easy to catch, its like a small fish cheating on their taxes, software will detect it eventually.
rasz 5y ago
That was the highest irregularity they could detect committed by people with no significant connections.

I don’t know about IRS but SEC enforcement actions are largely driven by complaints from regular people. Perhaps the stock broker got suspicious and acted per their ethical duties, or perhaps one of them wasn’t as tight lipped as they would have needed to be.

dboreham 5y ago
Perhaps the husband and wife are not getting along so well now and one of them snitched on the other?
travisjungroth 5y ago
The initial insider trading analysis is automated. Dude traded in front of 11 straight earnings calls. That’s gonna get you put on a list.
Mauricebranagh 5y ago
Or maybe someone at amazon tipped the SEC off

ping_pong 5y ago

SEC targets regular people to keep us in line. They let big institutional traders and connected people go.

refurb 5y ago

I have no doubt the SEC has a bunch of rules they use to flag suspicious transactions. The data analysis spits out a few names and they follow up in person to see who lawyers up and who cracks under pressure. It's also why Matt Levine's "rules of insider trading" includes "Don’t do it by buying short-dated out-of-the-money call options on merger targets". Certain transactions are suspicious as hell, especially when they can look at your trading history and determine you've never really traded much and just opened the account 2 days prior and made a $100,000 bet on the trade. Or for the really clever people, they find out although you made a suspicious trade you don't work for Amazon, but LinkedIn says you're the wife of someone who works in finance there. Oops! Though I wonder if that rule needs to be updated with r/WSB doing these trades all the time. https://www.bloomberg.com/opinion/articles/2018-08-12/the-10-laws-of-insider-trading https://www.bloomberg.com/opinion/articles/2018-08-12/the-10...

travisjungroth 5y ago
Today’s Money Stuff was on exactly this. Under “Insider Trading”: https://www.bloomberg.com/opinion/articles/2021-06-10/maybe-gamestop-is-good-now https://www.bloomberg.com/opinion/articles/2021-06-10/maybe-...
- refurb 5y ago
  Holy crap that's amazing. The FINRA list is an interesting approach. Nothing high tech, just put pressure on people who could have leaked. "In fact, when Hand was questioned by Neuralstem about Calice’s inclusion on a list of names that the Financial Industry Regulatory Authority sent to Neuralstem in its review of suspicious pre-Announcement trading, Hand falsely stated that Calice could not have obtained the negative clinical trial information from her." https://www.bloomberg.com/opinion/articles/2021-06-10/maybe-gamestop-is-good-now https://www.bloomberg.com/opinion/articles/2021-06-10/maybe-...
dheera 5y ago
I don't understand why "wife" has any legal bearing on this. What if it was a girlfriend? What if it was a friend? What if it was some random dude on reddit?
- crazygringo 5y ago
  Well they're interested in all of those. But conveniently, there's a legal document that establishes a relationship with your spouse, so that's really easy to find. And so it's kind of an extra level of stupid for getting caught...
- refurb 5y ago
  Lots of people who do insider trading think "if I don't do it then I won't get caught. I'll just have my [wife, dad, brother, cousin, mother-in-law] do the trade and the SEC will never figure it out".
- viraptor 5y ago
  Because (excluding some explicit agreements where they're legal), you share finances with your wife, so if you get money, so does your wife. Possibly the same with your girlfriend. A friend or random dude on reddit would need a proven connection.

omegaham 5y ago

It's really easy to look for trades before significant stock jumps. In this case, he made profitable trades before 11 straight earnings announcements. I'm sure their analysis flagged his trades, and then when they found out that his wife works at Amazon, they declared, "I choose you, Pikachu!"

midnightclubbed 5y ago
His wife was probably already flagged on the SEC system as having access to Amazon financials. It seems fairly likely the trades were marked as potentially suspicious and once the volume hit some threshold they were escalated to a human investigator. My wife has a series 7 security trading license. The SEC requires our personal trading accounts be flagged with this information along with information regarding my employer. Any trades I make in my employer's stock take additional processing time (along with standard blackout periods etc). I would assume people with restricted access to corporate financial statements are flagged and tracked similarly by the SEC.

seanmcdirmid 5y ago

Low hanging fruit. These kind of trading activities are almost super easy to catch, its like a small fish cheating on their taxes, software will detect it eventually.

rasz 5y ago

That was the highest irregularity they could detect committed by people with no significant connections.