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White collar crimes are barely punished - what a joke. Insider trading isn’t larceny, but for the sake of conversation let’s say it was - 1 million in insider

White collar crimes are barely punished - what a joke. Insider trading isn’t larceny, but for the sake of conversation let’s say it was - 1 million in insider trading would be like 4000 counts of grand larceny, each of which carry a max fine of 25K each. If people were actually fined 100 million for 1 million of insider trading I bet you it’d stop happening. For comparison $250 or more stolen is grand larceny and has a max fine of 25K and/or 5 years in state prison.

drstewart 5y ago
>If people were actually fined 100 million for 1 million of insider trading I bet you it’d stop happening. >For comparison $250 or more stolen is grand larceny and has a max fine of 25K and/or 5 years in state prison. And as we all know, there's no more grand larceny
- endisneigh 5y ago
  Larceny sentencing is also incredibly lenient in practice. This month an Erie County bookkeeper stole 90K from her clients and only had to pay 50K in restitution. My general point is that white collar criminals are hardly punished in practice - not that insider trading should be treated as larceny. (Because as I pointed out the sentencing is generally light anyway)
brianwawok 5y ago
Right. But if someone has total assets of say 500k... whats the difference of a 1 million or a 100 million dollar fine? You literally cannot collect either before the person dies / moves to Mexico.
WalterBright 5y ago
> I bet you it’d stop happening You'd lose that bet. The death penalty didn't stop pickpocketing, or any other crimes, for that matter. People just don't work like that. Constantly ratcheting up the penalties starts moving into medieval territory rather quickly.
- endisneigh 5y ago
  There's little connection between violent and non-violent crimes other than them both being crimes. I didn't make any claim about violent crimes so I'm not sure why you even mentioned the death penalty. The reality is, if you see these articles, average the restitution and see that in general you only pay 50% of what you illegally gained, there's little deterrence.
  - stonemetal12 5y ago
    Who said anything about violent crimes? He brought up that in Victorian England pickpocketing (a non violent crime) carried the death penalty. Even with the ultimate punishment pickpocketing still happened.
    - endisneigh 5y ago
      This is misleading because at the same time hundreds of other types of crimes, violent and non-violent could also result in the death penalty. Not to mention that was centuries ago and circumstances were very different. What punishment has completely stopped crime? No punishment can completely stop a crime from occurring, but the problem with insider trading is that the punishment doesn't even get back what was taken, so in a way you're rewarded, not punished.
- mgkimsal 5y ago
  > The death penalty didn't stop ... Are you sure? How would you be sure? If there's even a few people who've come close to committing a crime, then considered the punishment (prison/execution), then decided against the crime... isn't that "stopping" it?
  - WalterBright 5y ago
    > Are you sure? Since people kept getting hung for pickpocketing, the thread obviously failed to deter them. > isn't that "stopping" it? Reduce it, maybe, but not stopping it.
kyleblarson 5y ago
Have you been to a Walgreens in SF lately?
- endisneigh 5y ago
  No, but I know what you're referring to and that's a great example and is my point - see what happens when you don't punish people for clear criminal activity?
u678u 5y ago
There is no way a first time offender who steals $250 would get 5 years.
whywhywhywhy 5y ago
>White collar crimes are barely punished - what a joke. and not punished at all if you're a politician
sithlord 5y ago
Part of the challenge of fining someone is, to fine them in such a way that it is painful, and achievable. Fining someone 100million for 1 million in trading would be a punishment that no one would be able to pay back. Also, would just immediately invoke a chapter 13 bankruptcy, which I think, would discharge these. So basically you would just be issuing public bankruptcy with such extreme amounts.
- endisneigh 5y ago
  fraud penalties are not dischargeable. I'm not sure if this sort of penalty is a "fraud penalty," but you could structure a fine where it's with you for life.
paulpauper 5y ago
White collar crime can be punished very severely if it agaisnt individuals. Wire and mail fraud carry stiff penalties. Insider trading is somewhat different becase it's more about being it being unfair than theft or exploitation of another person or company. It is somewhere in the grey area of a victim vs. vicmtimless crime.
- JumpCrisscross 5y ago
  > Insider trading is somewhat different becase it's more about being it being unfair than theft or exploitation of another person of company Unlike wire or mail fraud, there is very little statute to stand on [1]. It's mostly common law, which makes the prosecute-or-not decision more challenging. [1] https://en.wikipedia.org/wiki/Insider_trading#United_States_law https://en.wikipedia.org/wiki/Insider_trading#United_States_...
dcolkitt 5y ago
But insider trading isn’t comparable to larceny whatsoever. There is no definitive victim. Yes, in some sense the market is “less fair”. But the purpose of insider trading law isn’t to create a level playing field. It’s perfectly legal for a well-funded hedge fund to fly helicopters over an oil refinery with infrared cameras, so they can know ahead before a public announcement how much revenue the company is doing. Rather, all insider trading requires the breach of fiduciary duty somewhere in the chain. The “victim” aren’t mom and pop investors, but the company itself. The idea being that the insider who leaks the information is misappropriating his fiduciary duty in a way that’s not in the direct interest of the company. But in this case the damage to the company is far less than the amount of profits the perpetrator gains. Ask yourself, where if you owned a company would you rather have $100 million in cash embezzled or have an employee make $100 million off well-timed stock trades with unrelated third parties? The damage to the victim only occurs in the sense that adverse selection in the form of insider trading dampens liquidity in the secondary market for company’s shares. Theoretically this decrease in liquidity should hurt the company’s valuation by making shares trade at an illiquidity discount. In practice, given how extremely liquid and efficient modern stock markets are, the impact of a few million in insider trading is a rounding error. The vast majority of HFTs and stat arb funds that provide liquidity don’t hold anywhere long enough to where insider trading would make a significant difference. Most stocks trade thick at a minimum penny tick anyway. (Logically we should only prosecute insider trading when stocks are priced over $100.) And the evidence is scant that less liquid stocks even trade at a discount, after controlling for size and industry. If we’re actually punishing crime based on the damage to the victim, then insider trading is almost certainly only pennies on the headline number.
- endisneigh 5y ago
  My point isn't insider trading in particular but white collar crime in general. Even with your example, why not just make insider trading legal then, if there is no victim per se? Presumably the entire reason it's illegal, in addition to what you said, is because the existence of insiders trading would make the entire stock market itself no longer something where laypeople can confidently say is fair in the sense that risk-adjusted publicly-informed trades are optimal. Presumably said laypeople would exit the stock market after losing confident of it, resulting is less liquidity. It's like pump and dumps, where the dumps aren't technically making victims of anyone as it's not like they've necessarily realized any loses. Regardless, money is being extracted from the so-called victims one way or another. in any case, I do agree with your point.
xxpor 5y ago
The real penalty is having a federal felony on your record. Good luck ever getting a white collar job ever again. Research has shown that (especially) for non-violent crimes, the real deterrent is getting caught at all, not the amount of punishment.

drstewart 5y ago

>If people were actually fined 100 million for 1 million of insider trading I bet you it’d stop happening. >For comparison $250 or more stolen is grand larceny and has a max fine of 25K and/or 5 years in state prison. And as we all know, there's no more grand larceny

endisneigh 5y ago
Larceny sentencing is also incredibly lenient in practice. This month an Erie County bookkeeper stole 90K from her clients and only had to pay 50K in restitution. My general point is that white collar criminals are hardly punished in practice - not that insider trading should be treated as larceny. (Because as I pointed out the sentencing is generally light anyway)

brianwawok 5y ago

Right. But if someone has total assets of say 500k... whats the difference of a 1 million or a 100 million dollar fine? You literally cannot collect either before the person dies / moves to Mexico.

WalterBright 5y ago

> I bet you it’d stop happening You'd lose that bet. The death penalty didn't stop pickpocketing, or any other crimes, for that matter. People just don't work like that. Constantly ratcheting up the penalties starts moving into medieval territory rather quickly.

endisneigh 5y ago
There's little connection between violent and non-violent crimes other than them both being crimes. I didn't make any claim about violent crimes so I'm not sure why you even mentioned the death penalty. The reality is, if you see these articles, average the restitution and see that in general you only pay 50% of what you illegally gained, there's little deterrence.
- stonemetal12 5y ago
  Who said anything about violent crimes? He brought up that in Victorian England pickpocketing (a non violent crime) carried the death penalty. Even with the ultimate punishment pickpocketing still happened.
  - endisneigh 5y ago
    This is misleading because at the same time hundreds of other types of crimes, violent and non-violent could also result in the death penalty. Not to mention that was centuries ago and circumstances were very different. What punishment has completely stopped crime? No punishment can completely stop a crime from occurring, but the problem with insider trading is that the punishment doesn't even get back what was taken, so in a way you're rewarded, not punished.
mgkimsal 5y ago
> The death penalty didn't stop ... Are you sure? How would you be sure? If there's even a few people who've come close to committing a crime, then considered the punishment (prison/execution), then decided against the crime... isn't that "stopping" it?
- WalterBright 5y ago
  > Are you sure? Since people kept getting hung for pickpocketing, the thread obviously failed to deter them. > isn't that "stopping" it? Reduce it, maybe, but not stopping it.

kyleblarson 5y ago

Have you been to a Walgreens in SF lately?

endisneigh 5y ago
No, but I know what you're referring to and that's a great example and is my point - see what happens when you don't punish people for clear criminal activity?

u678u 5y ago

There is no way a first time offender who steals $250 would get 5 years.

whywhywhywhy 5y ago

>White collar crimes are barely punished - what a joke. and not punished at all if you're a politician

sithlord 5y ago

Part of the challenge of fining someone is, to fine them in such a way that it is painful, and achievable. Fining someone 100million for 1 million in trading would be a punishment that no one would be able to pay back. Also, would just immediately invoke a chapter 13 bankruptcy, which I think, would discharge these. So basically you would just be issuing public bankruptcy with such extreme amounts.

endisneigh 5y ago
fraud penalties are not dischargeable. I'm not sure if this sort of penalty is a "fraud penalty," but you could structure a fine where it's with you for life.

paulpauper 5y ago

White collar crime can be punished very severely if it agaisnt individuals. Wire and mail fraud carry stiff penalties. Insider trading is somewhat different becase it's more about being it being unfair than theft or exploitation of another person or company. It is somewhere in the grey area of a victim vs. vicmtimless crime.

JumpCrisscross 5y ago
> Insider trading is somewhat different becase it's more about being it being unfair than theft or exploitation of another person of company Unlike wire or mail fraud, there is very little statute to stand on [1]. It's mostly common law, which makes the prosecute-or-not decision more challenging. [1] https://en.wikipedia.org/wiki/Insider_trading#United_States_law https://en.wikipedia.org/wiki/Insider_trading#United_States_...

dcolkitt 5y ago

But insider trading isn’t comparable to larceny whatsoever. There is no definitive victim. Yes, in some sense the market is “less fair”. But the purpose of insider trading law isn’t to create a level playing field. It’s perfectly legal for a well-funded hedge fund to fly helicopters over an oil refinery with infrared cameras, so they can know ahead before a public announcement how much revenue the company is doing. Rather, all insider trading requires the breach of fiduciary duty somewhere in the chain. The “victim” aren’t mom and pop investors, but the company itself. The idea being that the insider who leaks the information is misappropriating his fiduciary duty in a way that’s not in the direct interest of the company. But in this case the damage to the company is far less than the amount of profits the perpetrator gains. Ask yourself, where if you owned a company would you rather have $100 million in cash embezzled or have an employee make $100 million off well-timed stock trades with unrelated third parties? The damage to the victim only occurs in the sense that adverse selection in the form of insider trading dampens liquidity in the secondary market for company’s shares. Theoretically this decrease in liquidity should hurt the company’s valuation by making shares trade at an illiquidity discount. In practice, given how extremely liquid and efficient modern stock markets are, the impact of a few million in insider trading is a rounding error. The vast majority of HFTs and stat arb funds that provide liquidity don’t hold anywhere long enough to where insider trading would make a significant difference. Most stocks trade thick at a minimum penny tick anyway. (Logically we should only prosecute insider trading when stocks are priced over $100.) And the evidence is scant that less liquid stocks even trade at a discount, after controlling for size and industry. If we’re actually punishing crime based on the damage to the victim, then insider trading is almost certainly only pennies on the headline number.

endisneigh 5y ago
My point isn't insider trading in particular but white collar crime in general. Even with your example, why not just make insider trading legal then, if there is no victim per se? Presumably the entire reason it's illegal, in addition to what you said, is because the existence of insiders trading would make the entire stock market itself no longer something where laypeople can confidently say is fair in the sense that risk-adjusted publicly-informed trades are optimal. Presumably said laypeople would exit the stock market after losing confident of it, resulting is less liquidity. It's like pump and dumps, where the dumps aren't technically making victims of anyone as it's not like they've necessarily realized any loses. Regardless, money is being extracted from the so-called victims one way or another. in any case, I do agree with your point.

xxpor 5y ago

The real penalty is having a federal felony on your record. Good luck ever getting a white collar job ever again. Research has shown that (especially) for non-violent crimes, the real deterrent is getting caught at all, not the amount of punishment.