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> The people who get CAUGHT doing it are complete idiots and/or greedy. Even if you're "smart" about it, you can only hit so many lottery tickets before you c

> The people who get CAUGHT doing it are complete idiots and/or greedy. Even if you're "smart" about it, you can only hit so many lottery tickets before you come under suspicion. I'd bet the best way to get away with insider trading is to do it once, make under $1 million, then walk the hell away and never speak of it.

Retric 5y ago
Insider information isn’t guaranteed to let you predict the stock price. You are much more likely to actually make money with multiple small bets than any one big bet.
- radicaldreamer 5y ago
  Yes, there have been several people charged with insider trading who actually lost money on the trades.
  - jabedude 5y ago
    How were they caught then?
    - paulpauper 5y ago
      insider trading does not imply making money. just trading on insider info.
    - mason55 5y ago
      The SEC will send a list to your compliance dept if they see weird trades (e.g. short-dated out-of-the-money calls) and ask if anyone on the list works there. The compliance dept also has a list of people with material non-public info and they get the list of people who made weird trades with the question “do you know any of these people?” If you know one and you didn’t provide them info then you say so because the implied threat is they’ll find out either way that you know one of them.
      - 1-more 5y ago
        And the wild thing is that lying to a federal investigator is a crime in and of itself! So don't say you don't know the person they ask about. 18 U.S. Code § 1001 - Statements or entries generally https://www.law.cornell.edu/uscode/text/18/1001 https://www.law.cornell.edu/uscode/text/18/1001
        IncRnd 5y ago
        That's not exactly true, but to use a turn of phrase - close enough for government business! [1] The lie is a felony but only when connected to a federal matter. [2] [3] [4] [1] This used to mean (many moons ago) something of very high quality. However, as our government became ever more like what is _now_ our government, the idiom took on the opposite meaning: good enough to say it's done, so we can move on from it. It's also used to say when something is correct for the discussion but not in the broader sense. Source? My neighbor the FBI agent told me, and I've heard it in action many times since then. [2] https://www.pagepate.com/experience/criminal-defense/federal-crimes/false-statement-charges/ https://www.pagepate.com/experience/criminal-defense/federal... [3] https://www.justice.gov/archives/jm/criminal-resource-manual-916-false-statements-federal-investigator https://www.justice.gov/archives/jm/criminal-resource-manual... [4] https://www.mololamken.com/knowledge-Is-It-a-Crime-To-Lie-to-the-Government-Even-If-You-Are-Not-Under-Oath https://www.mololamken.com/knowledge-Is-It-a-Crime-To-Lie-to...
        deleted 5y ago
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        deleted 5y ago
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        bsder 5y ago
        Rule the first: Don't talk to the police. The SEC and the IRS are police. Obligatory repost: https://www.youtube.com/watch?v=d-7o9xYp7eE&t=612s https://www.youtube.com/watch?v=d-7o9xYp7eE&t=612s
    - dkrich 5y ago
      Because they made over $3 million probably having done little to no trading prior to that run. Pretty much anyone could spot insider trading patterns. I’d be willing to bet these guys were making bets only on Netflix in the form of short-dated options most of which typically expire worthless. If someone were to repeatedly aggressively buy low probability short-dated options around an event like earnings and win consistently you would be able to infer that they are trading on insider knowledge. Of course recognizing the pattern is only half the battle. They also have to figure out how they are accessing the inside info, hence tracing the traders back to Netflix employees and conversations they had regarding paybacks, etc.
  - paulpauper 5y ago
    not enough to know the numbers, u have to know how market will react. I have seen many times a company post huge numbers that beat estimates and not go up much.
  - geoduck14 5y ago
    Martha Stewart was charged with insider trading - I'm mostly certain she lost money in the trade. Also, she was convicted for LYING about insider trading.
    - 300bps 5y ago
      Through insider trading, Martha Stewart avoided a $45,000 loss. She lied repeatedly to investigators saying among other things that it was a pre-arranged trade. The person that tipped her off admitted everything though. She went to jail for lying to investigators, obstructing justice, etc. And still had to pay a $195,000 civil fine for the insider trading!! Source: https://biography.yourdictionary.com/articles/why-did-martha-stewart-go-to-jail.html https://biography.yourdictionary.com/articles/why-did-martha...
      - nearbuy 5y ago
        Imagine being a (former?) billionaire and going to prison over avoiding a $45,000 loss. I don't know what she was thinking.
        nearbuy 5y ago
        Just to correct my last comment, after looking up the case, it seems Martha Stewart was actually not found guilty of insider trading. She was found guilty of lying to investigators.
- skrtskrt 5y ago
  Good point - we'll file making negative money under "make under $1 million". Even if you lost money the one time you did it, I'd probably still recommend doing it approximately once.
  - paulpauper 5y ago
    if the worst penalty means loss of gains, it is rational to do it at least once and be verrrry careful to not get caught
    - ok123456 5y ago
      Martha Stewart went to prison for lying about a trade.
      - kelnos 5y ago
        There's a "simple" solution to that: don't lie about it. If the SEC comes knocking on your door, refuse to talk to them until you've had a chance to consult with a lawyer, and then do what the lawyer says.
rasz 5y ago
Nah, the safest way involves relatives in politics.
- skrtskrt 5y ago
  or just being a senator
  - sroussey 5y ago
    Yeah, the write the laws and exempt themselves.
- stevespang 5y ago
  Yeah, like Pelosi's husband getting insider information as wide as the Grand Canyon ! I knew a guy in Houston 20 some odd years ago who got tagged for commercial bribery. He hustled/befriended the employee of his much larger competitor to buy crates of his junk cylinder heads he bought at 10 cents on the dollar - - - for 90 cents on the dollar. A total of like $700,000. The prosecutor told him if he copped out he would reduce the charges to some misdemeanor, no jail, and no fine. It was a no brainer, he kept all the ill gotten gains. Crime pays.
Kluny 5y ago
The thing is, 1 million is a pretty cheap price to sell your integrity. If you do get caught, you got caught over a relatively small sum. Once you've gotten your hands dirty, why not go all in? Why not go for James Bond villain money? That's not rational, of course, but humans aren't rational.
- xvector 5y ago
  It is rational if the punishment for insider trading stays relatively constant but the benefit increases with money traded - which it probably does.
  - skrtskrt 5y ago
    pretty sure they claw it all back, then fine you, then you pay your lawyers, then they maybe throw you in jail.
    - deleted 5y ago
      [deleted]
    - sumedh 5y ago
      > then they maybe throw you in jail. If you are very rich they dont throw you in jail.
  - thinkloop 5y ago
    You forgot the (non-linear) increased risk of getting caught with each iteration.
- Johnny555 5y ago
  You don't always have that option, rarely does someone say "Hey, I have a plan to steal unlimited amounts of money, do you think we should steal $1M or $100M" Besides, unless you're already wealthy it's harder to hide the theft of huge sums of money.

Retric 5y ago

Insider information isn’t guaranteed to let you predict the stock price. You are much more likely to actually make money with multiple small bets than any one big bet.

radicaldreamer 5y ago
Yes, there have been several people charged with insider trading who actually lost money on the trades.
- jabedude 5y ago
  How were they caught then?
  - paulpauper 5y ago
    insider trading does not imply making money. just trading on insider info.
  - mason55 5y ago
    The SEC will send a list to your compliance dept if they see weird trades (e.g. short-dated out-of-the-money calls) and ask if anyone on the list works there. The compliance dept also has a list of people with material non-public info and they get the list of people who made weird trades with the question “do you know any of these people?” If you know one and you didn’t provide them info then you say so because the implied threat is they’ll find out either way that you know one of them.
    - 1-more 5y ago
      And the wild thing is that lying to a federal investigator is a crime in and of itself! So don't say you don't know the person they ask about. 18 U.S. Code § 1001 - Statements or entries generally https://www.law.cornell.edu/uscode/text/18/1001 https://www.law.cornell.edu/uscode/text/18/1001
      - IncRnd 5y ago
        That's not exactly true, but to use a turn of phrase - close enough for government business! [1] The lie is a felony but only when connected to a federal matter. [2] [3] [4] [1] This used to mean (many moons ago) something of very high quality. However, as our government became ever more like what is _now_ our government, the idiom took on the opposite meaning: good enough to say it's done, so we can move on from it. It's also used to say when something is correct for the discussion but not in the broader sense. Source? My neighbor the FBI agent told me, and I've heard it in action many times since then. [2] https://www.pagepate.com/experience/criminal-defense/federal-crimes/false-statement-charges/ https://www.pagepate.com/experience/criminal-defense/federal... [3] https://www.justice.gov/archives/jm/criminal-resource-manual-916-false-statements-federal-investigator https://www.justice.gov/archives/jm/criminal-resource-manual... [4] https://www.mololamken.com/knowledge-Is-It-a-Crime-To-Lie-to-the-Government-Even-If-You-Are-Not-Under-Oath https://www.mololamken.com/knowledge-Is-It-a-Crime-To-Lie-to...
        deleted 5y ago
        [deleted]
        deleted 5y ago
        [deleted]
      - bsder 5y ago
        Rule the first: Don't talk to the police. The SEC and the IRS are police. Obligatory repost: https://www.youtube.com/watch?v=d-7o9xYp7eE&t=612s https://www.youtube.com/watch?v=d-7o9xYp7eE&t=612s
  - dkrich 5y ago
    Because they made over $3 million probably having done little to no trading prior to that run. Pretty much anyone could spot insider trading patterns. I’d be willing to bet these guys were making bets only on Netflix in the form of short-dated options most of which typically expire worthless. If someone were to repeatedly aggressively buy low probability short-dated options around an event like earnings and win consistently you would be able to infer that they are trading on insider knowledge. Of course recognizing the pattern is only half the battle. They also have to figure out how they are accessing the inside info, hence tracing the traders back to Netflix employees and conversations they had regarding paybacks, etc.
- paulpauper 5y ago
  not enough to know the numbers, u have to know how market will react. I have seen many times a company post huge numbers that beat estimates and not go up much.
- geoduck14 5y ago
  Martha Stewart was charged with insider trading - I'm mostly certain she lost money in the trade. Also, she was convicted for LYING about insider trading.
  - 300bps 5y ago
    Through insider trading, Martha Stewart avoided a $45,000 loss. She lied repeatedly to investigators saying among other things that it was a pre-arranged trade. The person that tipped her off admitted everything though. She went to jail for lying to investigators, obstructing justice, etc. And still had to pay a $195,000 civil fine for the insider trading!! Source: https://biography.yourdictionary.com/articles/why-did-martha-stewart-go-to-jail.html https://biography.yourdictionary.com/articles/why-did-martha...
    - nearbuy 5y ago
      Imagine being a (former?) billionaire and going to prison over avoiding a $45,000 loss. I don't know what she was thinking.
      - nearbuy 5y ago
        Just to correct my last comment, after looking up the case, it seems Martha Stewart was actually not found guilty of insider trading. She was found guilty of lying to investigators.
skrtskrt 5y ago
Good point - we'll file making negative money under "make under $1 million". Even if you lost money the one time you did it, I'd probably still recommend doing it approximately once.
- paulpauper 5y ago
  if the worst penalty means loss of gains, it is rational to do it at least once and be verrrry careful to not get caught
  - ok123456 5y ago
    Martha Stewart went to prison for lying about a trade.
    - kelnos 5y ago
      There's a "simple" solution to that: don't lie about it. If the SEC comes knocking on your door, refuse to talk to them until you've had a chance to consult with a lawyer, and then do what the lawyer says.

rasz 5y ago

Nah, the safest way involves relatives in politics.

skrtskrt 5y ago
or just being a senator
- sroussey 5y ago
  Yeah, the write the laws and exempt themselves.
stevespang 5y ago
Yeah, like Pelosi's husband getting insider information as wide as the Grand Canyon ! I knew a guy in Houston 20 some odd years ago who got tagged for commercial bribery. He hustled/befriended the employee of his much larger competitor to buy crates of his junk cylinder heads he bought at 10 cents on the dollar - - - for 90 cents on the dollar. A total of like $700,000. The prosecutor told him if he copped out he would reduce the charges to some misdemeanor, no jail, and no fine. It was a no brainer, he kept all the ill gotten gains. Crime pays.

Kluny 5y ago

The thing is, 1 million is a pretty cheap price to sell your integrity. If you do get caught, you got caught over a relatively small sum. Once you've gotten your hands dirty, why not go all in? Why not go for James Bond villain money? That's not rational, of course, but humans aren't rational.

xvector 5y ago
It is rational if the punishment for insider trading stays relatively constant but the benefit increases with money traded - which it probably does.
- skrtskrt 5y ago
  pretty sure they claw it all back, then fine you, then you pay your lawyers, then they maybe throw you in jail.
  - deleted 5y ago
    [deleted]
  - sumedh 5y ago
    > then they maybe throw you in jail. If you are very rich they dont throw you in jail.
- thinkloop 5y ago
  You forgot the (non-linear) increased risk of getting caught with each iteration.
Johnny555 5y ago
You don't always have that option, rarely does someone say "Hey, I have a plan to steal unlimited amounts of money, do you think we should steal $1M or $100M" Besides, unless you're already wealthy it's harder to hide the theft of huge sums of money.