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Twilio employees, associates charged with insider trading by SEC

• throwaytwilios 5y ago
• jakupovic 5y ago
  Too bad they only did 1MM, that's no enough to negotiate with SEC. This is pitiful, people steal billions and yet we only hear about this.
• it200219 5y ago
  Totally not releated to topic but it looks like the messages that were sent between them can and are read by third party. So whatever we hear about E2E encryption is BS ?
• foolinaround 5y ago
  the other factor that is not considered is that while the crime happened in the US, there is no single culture in which employees are from, considering immigration, early experiences etc. the standards that people in a society hold can linked to the level of corruptions in said society and what is ok is vastly different. The temptation is the same, but not the reaction to it....
• tempsy 5y ago
  I can’t understand the rationale behind blowing up your life and career in which you made $300k+/year for a tiny $1m gain split between 3 people and their families. Why are people who should otherwise be much smarter than this doing incredibly dumb things? Just greed? and entitlement?
  • sharemywin 5y ago
    probably thought they could get away with it
    • tempsy 5y ago
      lol well yeah. but the SEC literally has to run one query that shows someone with a big gain buying stock and options before earnings and work at said company which i’m pretty sure you’re not supposed to be doing in the first place whether you had special info or not
      • deleted 5y ago
        [deleted]
  • jasonlotito 5y ago
    > Why are people who should otherwise be much smarter than this Being smart at your job doesn't mean you aren't ignorant. In fact, I'd say the culture of equating "good at computers" meaning you are probably "smarter than this" does more to shield us from the truth of our own ignorance.
    • deleted 5y ago
      [deleted]
    • ashtonkem 5y ago
      It seems to be a problem common among specialists, especially among highly valued specialists. I’ve heard the same complaints about lawyers and doctors, for example, so it doesn’t seem to be specific to the “good with computers” crowd.
  • rossdavidh 5y ago
    My wife owns a small retail clothing store. It is her experience that the people who attempt to steal, are not generally lower income, they are often among the most well-to-do members of the population that goes through her store. Very different stakes, and very different age group (she mostly sells to teenagers and twentysomethings), but same psychology, I think. "I'm not the sort of person who gets arrested and sent to prison". Which is true until suddenly it isn't.
    • ethbr0 5y ago
      I call this the "National Park effect". Being constantly coddled in some way dulls your ability to recognize when circumstances have changed, and those safeguards are no longer present. See: tourists who wander off in National Parks with no cell service, with no water or survival gear, and then think it's a good idea to pet a bison The concept of laying bleeding, miles from the nearest road, with broken bones, as night falls and the temperature drops is so foreign to their experience that it just isn't an imagined possibility.
      • saalweachter 5y ago
        There's also the "cynicism effect". If you believe "everyone does it" -- Congress, billionaire X, the C-suite at every company -- it becomes a lot easier to justify you doing it yourself. You're not doing anything wrong, everyone does it.
      • nebula8804 5y ago
        >Being constantly coddled in some way dulls your ability to recognize when circumstances have changed, and those safeguards are no longer present. It will be interesting to see this happen nationwide if the music were to stop(or slow down) in the US economy as some are predicting.
        • ethbr0 5y ago
          That's what the 2008 crisis was at its root -- too many people, at all levels, who'd forgotten to be alert for danger and mistakenly assumed that the recent past served as fundamental bounds of future possibility.
  • bsder 5y ago
    Generally--because they're used to this kind of cheating and have never been busted for it before. The problem is that people think they've graduated to "no longer has to worry about consequences" at the $1 million range. And that's true--unless the Feds get involved. At that point, you need to be in the $100+ million range to get away with crime. So, there is this danger area between $1 million where you get lots of local feedback that you are above consequences and $100 million where you actually are above consequences. It's very easy to get complacent and trip up in that window. (I'm remembering the Silicon Valley option backdating fiasco and how many people it caught ...)
  • pm90 5y ago
    This is a total guess, but based on the fact that all the perps names are Indian, there is a chance that they are immigrants who are either not aware of the law or the serious consequences involved if you get caught. If they're convicted this will almost certainly affect their immigration status and likely get them deported too. Not excusing what they did at all, but it should be noted that the judicial systems in India and the US are very different; its not very common to get busted for financial crimes. I honestly think that whenever immigrants come over they should be required to attend a class about the law enforcement situation in the US, and how there's very real chances of getting prosecuted if you do crimes.
    • metadat 5y ago
      Publicly traded companies make office employees periodically (usually annually) go through a corporate anti-corruption training course covering inappropriate gifts and insider trading. If these fellas were smart enough to be hired at Twilio, claiming ignorance is beyond ridiculous. If somehow twilio decided to skip all these trainings, twilio can be held liable and sued by their employees who get in trouble. Do you think their savvy legal team (c'mon, it's in Telco space, they have a legal army) could be that dumb? Having been present during an IPO and working for publicly traded companies, I can confidently say "No, not a chance".
  • npteljes 5y ago
    And for the rush of it? And for the money itself? 300k when you earn 300k boosts you one year ahead. It's not a small amount of money. Also smart and wise is not the same.
• charcircuit 5y ago
  All insider trading should be legal. Imagine the opposite case. You know your company is doing poorly but the government forces you to not sell your stock and take a loss.
  • sp332 5y ago
    It's only illegal if you're using secret information. The company can't report info to some shareholders and not others.
    • charcircuit 5y ago
      In my example the company is not reporting to any shareholders. You are doing trades based off of information that you have collected yourself.
      • sp332 5y ago
        -
        • notch656a 5y ago
          >If you're using information anyone could get with some research, then it's not illegal. If I am willing to give out information gained during employment of the company to anyone asking as part of their research, then by this definition it's not illegal, as anyone can get the information with some research.
          • ethbr0 5y ago
            See fair disclosure requirements https://www.investor.gov/introduction-investing/investing-basics/glossary/fair-disclosure-regulation-fd https://www.investor.gov/introduction-investing/investing-ba...
            • notch656a 5y ago
• extr 5y ago
  What a lame way to insider trade. I thought that instance of the Capital One analysts using internal database queries to understand which retailers were having good quarters was far more interesting and insidious. Similarly you could imagine a lot more subtle ways to leverage insider Twilio information (count of verification texts sent by client?) to make far more obscure bets. The SEC definitely takes a look at anyone who goes from zero trading -> making improbably great trades worth millions though, so better have a good patsy lined up! Edit: Context for the traders I was talking about. What they did was much cooler and honestly kind of impressive: https://www.bloomberg.com/view/articles/2015-01-23/capital-one-fraud-researchers-may-also-have-done-some-fraud https://www.bloomberg.com/view/articles/2015-01-23/capital-o...
  • RC_ITR 5y ago
    >count of verification texts sent by client This is what I thought it would be based on the headline and was frankly disappointed that the truth was so quotidian. Certain Twilio engineers could very likely keep an index of major gig-economy/delivery services and track both user and driver sign-ups in a way that could be very valuable NMPI and have the advantage of being at a broad range of companies that are only tangentially related to their employer. In fact, @SEC if you're reading this, you might be missing some bigger fish...
  • kyleblarson 5y ago
    Add to that they apparently chatted about it in some tool that had an auditable history and one can surmise that these people weren't the most sophisticated bad actors.
    • MengerSponge 5y ago
      "The stock will go up for sure." Swiper, no swiping!
  • ramesh31 5y ago
    >I thought that instance of the Capital One analysts using internal database queries to understand which retailers were having good quarters was far more interesting and insidious. How is this seriously different than what any one of a million other "AI analytics" companies are doing with customer data right now?
• runako 5y ago
  I'm sure the SEC has an array of tools with which to comb through the data, but I would bet that the vast majority of these cases against non-professional traders are flagged by identifying retail brokerage accounts where the notional value of options outstanding is 1) larger than some % of the the portfolio size (e.g. > 50%) 2) with exposure concentrated on 1-3 stocks 3) with no similarly-sized follow-up trades in other names (e.g. they didn't just figure out a new methodology and begin applying it across different companies) Due diligence follow-up to determine that one or more of the yokels works for the company in question, and LinkedIn will get you more of the perps. The only surprising thing to me is that the SEC likely hasn't had to tune this filter for decades.
  • tempsy 5y ago
    uhm it’s not even that difficult. they just see if you traded in your own account for a company you work for around earnings. i’m pretty sure you’re not supposed to do it at all but maybe dependent on the situation.
    • ethbr0 5y ago
      You're not supposed to do that at all. You could argue you didn't possess any material non-public information, but since essentially every internal document you access is non-public information, that's probably not an argument you want to deal with. Just trade your own company's shares in the windows after earnings releases. Or set up a pre-defined share sale plan in one of these windows, covering the future, and don't touch it.
      • mgfist 5y ago
        Many companies, and (most?) tech companies have trading black out periods that are lifted for about a month a few days after earnings. It applies to your personal brokerage account too, even though they can't technically enforce it.
        • jdmichal 5y ago
• broknbottle 5y ago
  When is the announcement happening for the members of congress that made investments in key areas after they were briefed on covid-19 and potential impact? > We are a free market economy. They should be able to participate in that
  • sneak 5y ago
    Insider trading requires privileged access to inside information. Covid impacts to society are not inside/internal data to those companies, those briefings were happening when it was obvious we were having a global pandemic to anyone paying attention. The inputs to the deductive reasoning process were public information.
    • syshum 5y ago
      Congress is privy to inside information that impacts the market via several mechanism including private briefings for upcoming policy changes, or knowing about laws that will be passed before the actual votes Congress should be investigate more thoroughly for insider trading, or even barred from trading at all (which is my preferred solution)
    • nawgz 5y ago
      > Insider trading requires privileged access to inside information You think knowledge of the laws and regulations that Congress is going to enact before they're enacted or public is not "inside information"? Defend this stance.
  • mgraczyk 5y ago
    All the specific allegations that I looked into were absolutely not insider trading. The heavily scrutinized Pelosi trades, for example, were pre-planned rolling of options that did not generate profits directly and would have been executed very differently if the trader had any foreknowledge of future price movements in the underlying. People often sell and buy options at different expiry dates to keep their position static, not to trade based on new information.
    • 5y ago
• xyst 5y ago
  This is a proud win in the SEC handbook? $1 million dollars is fucking chump change. Whales do this on a 1000X scale every fucking day (yes billions). They even collaborate amongst other trading firms to pump and dump. Where's the prosecution related to the GME + Citadel Securities + Melvin Capital illegal naked short selling? Remember when this group was hemorrhaging billions of dollars and forced RH to remove the "Buy" button on GME? I ask again, where's the prosecution there?
  • mgraczyk 5y ago
    They are though https://www.thestreet.com/markets/regulation/doj-sec-probe-dozens-of-firms-in-short-selling-sting https://www.thestreet.com/markets/regulation/doj-sec-probe-d...
    • xyst 5y ago
      investigations != prosecutions when sec posts the story, then I will believe it. I strongly suspect the "investigations" will lead to nowhere.
      • filoleg 5y ago
        The process takes time. Prosecution doesn't, and shouldn't, happen without an investigation. Whether this specific investigation will lead somewhere or not is yet to be determined. You cannot say they did nothing until the investigation is completed. If the investigation doesn't lead to a just conclusion, then we can talk. But as of now, your anger at SEC just sounds like being annoyed because they decided not to speedrun this. If you actually believe that a wrongdoing has happened here, then the investigation needs to be thorough and conclusive, to make sure there were no gaps through which the guilty party can escape. And that's assuming any wrongdoing actually happened, which is what the investigation will need to determine.
      • throwaway5752 5y ago
        I searched for Raj Rajaratnam's case and found up with Malnik, Blakstad, and Martoma cases by accident. Those are very large prosecutions with prison time. Did you not see those?
• epa 5y ago
  Insider trading is no joke. If you have access to metrics you have access to inside information.
• kieselguhr_kid 5y ago
  I work in billing software for a publicly traded software company and this is a constant temptation. I'm never gonna do it because I'm not gonna blow up my career for a relative pittance, but I can't tell you how many times I've been annoyed that I couldn't act on private information and make ~$100k or so. These guys are like the kids who saw the Tide Pod challenges and decided to actually eat the pods. I bet insider trading is not as fun when you're unemployed and bankrupt.
  • randomcarbloke 5y ago
    What you're proposing is not insider trading but is likely prohibited contractually, if you tell your buddy to do it and in some way benefit...now you're in trouble. But capitalising on insider knowledge is generally okay from the SEC's perspective.
  • mynegation 5y ago
    [Edited to remove harsh phrasing]. Consider this: there is no upside from this comment and quite a bit of potential (although likely low probability) downside.
    • Eiriksmal 5y ago
      Being tempted and acting on those temptations are two different things. There is nothing damning in this comment. I appreciate the author's honesty.
      • mynegation 5y ago
        I have no reasons to imply that the commenter would be tempted or acted at all. But there are means of coercion other than money. I admit though, I watched too many spy movies and TV shows
        • daenz 5y ago
          I think you gave good advice. If someone has privileged access/info, they shouldn't advertise it to the world. It's just asking for trouble.
• purple_ferret 5y ago
  Interestingly (based on their linkedin profiles), they were promoted after the event. Some of the friends listed even got jobs within Twilio. One even works at Google. Might not the first time they've made such moves; just perhaps the boldest.
  • f7ebc20c97 5y ago
    Real straight shooters with upper management written all over them.
• nickdothutton 5y ago
  $1m in profits eh? SEC really going after the big fish.
• par 5y ago
  Wow, not even enough money to retire. Their stock grants are probably worth more than whatever they made trading. Seems like a bad move.
• deleted 5y ago
  [deleted]
• guidovranken 5y ago
  > On several occasions between late March and early May 2020, before Twilio’s public earnings announcement, Sure, Lagudu and Chotu Pulagam used internal chat channels to discuss in Telugu whether Twilio might exceed market expectations in its quarterly report of earnings, due in May 2020. They concluded that Twilio’s stock price would “rise for sure” after the quarterly results were announced publicly. https://www.sec.gov/litigation/complaints/2022/comp-pr2022-55.pdf https://www.sec.gov/litigation/complaints/2022/comp-pr2022-5... I assume "internal chat channels" means the company Slack so this wasn't well planned at all. I wonder if they were even aware they were committing a felony at that stage.
  • ffggvv 5y ago
    probably or they wouldnt have used telugu. maybe assuming it would be harder to get caught
    • stavros 5y ago
      Why wouldn't they have used their native language in a secure channel?
      • ffggvv 5y ago
        im saying they probably use it in the internal slack channel assuming it would be less likely to be caught than if they used english
• sonicggg 5y ago
  According to the article, they 'concluded in a joint chat that Twilio’s stock price would “rise for sure.”' I bet there are a lot of folks doing this out there, but they are more careful. So they had a non-encrypted chat room about it. It'd be funny if they found this in the company 's Slack workspace. On top of that, they involved a bunch of other family members. That's too much.
  • deleted 5y ago
    [deleted]
• mrjaeger 5y ago
  From the Complaint (https://www.sec.gov/litigation/complaints/2022/comp-pr2022-55.pdf https://www.sec.gov/litigation/complaints/2022/comp-pr2022-5...): "Kamujula met with Sure on April 8, 2020 and later that night began purchasing out-of-the-money Twilio call options." Clearly not Money Stuff readers!
• deleted 5y ago
  [deleted]
• udkl 5y ago
  • ribs 5y ago
    No doubt there are lawbreakers in AP, just as they are in every other state, in every other place. That you’ve heard more or remembered more or paid more attention to those reports is of little to no material importance for grasping what is going on in the world or predicting what will happen next and who will do what.
    • udkl 5y ago
• donatj 5y ago
  > SEC’s complaint alleges that despite receiving a company policy that prohibited them from insider trading […] trade[d] Twilio options and stock in advance of its May 6, 2020 earnings announcement while in possession of the confidential information Isn't it illegal regardless of company policy? That's such weird phrasing.
  • ceeplusplus 5y ago
    Presumably this is so they can't claim ignorance and receive a lighter sentence.
• truthwhisperer 5y ago
• nova22033 5y ago
  Somebody should have subscribed to the Matt Levine newsletter.
  • drivebycomment 5y ago
    No kidding. I think having people read through a few select articles of his newsletter would make most insider trading go away - most people would not do insider trading and a select few will study what gets caught and figure out a way to avoid it :) I consider his newsletter as the equivalent of the encyclopedia of ethical failure by DoD for the financial industry.
• RspecMAuthortah 5y ago
  Not a sympathizer of these idiots who clearly thought that would get away. But what really astonishes me is how SEC is consistently after these retail small players when members of congress and its different committees are brazenly involved in insider trading and no one bats an eye. Hell even the Fed itself and its members were involved in trades that could only be explained by insider knowledge. My sense is SEC wants to send the message it is OK if big players do it but small players beware.
  • swyx 5y ago
    well, for one, members of congress are legally allowed to insider trade. pretty convenient laws when you make the laws.
    • CharlesW 5y ago
      > well, for one, members of congress are legally allowed to insider trade. Are they? Highlight link: https://en.wikipedia.org/wiki/STOCK_Act#:~:text=The%20law%20prohibits%20the%20use%20of%20non%2Dpublic%20information%20for%20private%20profit%2C%20including%20insider%20trading%20by%20members%20of%20Congress%20and%20other%20government%20employees https://en.wikipedia.org/wiki/STOCK_Act#:~:text=The%20law%20....
      • JumpCrisscross 5y ago
        Spoiler: members of Congress are not allowed to trade on inside information. We haven't yet seen a prosecution, however.
        • dnsco 5y ago
          Why go after congress members making millions when you can go after software engineers making thousands?
  • paulpauper 5y ago
    Because it's not as obvious regarding congress. Person A gets tip, hands to B and makes trade, is a direct link and can be proven in court. Also, Congress has 532 people, so by statistical certainty we should expect some to beat the market.
• swyx 5y ago
  looks like the Netflix crew were at least better at it than the Twilio crew https://news.ycombinator.com/item?id=28227209 https://news.ycombinator.com/item?id=28227209
• paulpauper 5y ago
  >>Three tech company employees along with family and friends charged in $1 million scheme They should have just made YouTube livestreams pretending to be VItalik Buterin, Elon Musk, or Michael Saylor instead. Those guys making million every month, no arrests, no SEC.
• paulpauper 5y ago
  Yet again, supposedly smart, well-paid people taking huge risks for relatively small payouts.
• tlb 5y ago
  This seems surprisingly far down the list of what SEC's priorities should be. A million dollar fraud when there are almost certainly billion dollar frauds ongoing. One theory for going after small fish is that fraudsters often start small and get bigger and more sophisticated (and harder to catch). Therefore, it's good to nail them early and signal to other junior fraudsters that they're not underneath the radar. It'd be interesting to take famous big-time fraudsters and work backwards to the very first crime they got away with. And reckon how much time and resources could've been saved if they'd caught them then.
  • eklitzke 5y ago
    Presumably someone tipped the SEC about this, so they just had to go and verify the trades and then ask Twilio for chat logs. The report actually mentions exactly which SEC employees led the investigation, and it wasn't a huge team.
    • bitcoinmoney 5y ago
      They’re probably bragging on social media. Sucks for them.
  • thedz 5y ago
    i think there's also a fallacy there that you can't work on billion dollar cases while also pursuing million dollar ones even if they were the same people, relatively simple cases like this probably helps provide some sense of closure while the big fish are being hunted
• Johnny555 5y ago
  The surprising thing is that they had to resort to insider information to know that a communications platform company would do well during a Pandemic when everyone is working from home.
• elwell 5y ago
  If the employees were receiving (vesting) a standard monthly amount of RSUs for compensation, normally selling immediately upon vesting, and decided to wait a couple months based on inside information about company performance that they were just naturally exposed to during their work, would that be considered insider trading? I assume it would. Hmm... it's kind of scary how easy it would be to inside trade without really thinking about it, or even without being that intentional about it.
  • temp_praneshp 5y ago
    > would that be considered insider trading Not by default. Typically, according to the trainings I have received, over and over again, it's only wrong to trade if you are exposed to material non public information (MNPI). Such a person would have to know they are in a special category, unless they live under a rock or something. I think it's ridiculously difficult for an employee receiving a standard monthly amount of RSUs to "mistakenly" commit insider trading.
    • deleted 5y ago
      [deleted]
  • kasey_junk 5y ago
    Most public company equity sales are subject to blackout periods where you cannot sell (usually prior to release of financials) because it is presumed anyone with equity compensation views material non-public information as a matter of course. Selling in those dates is subject to liabilities for the employees. That said if your equity management system doesn’t handle this for you, you have other problems.
    • Bedon292 5y ago
      My company has blackout periods for certain parts of the company, such as finance. But not the whole company. And it does light grants for most all employees. But it gets pretty fuzzy fast as to who has MNPI vs who doesn't. Did someone mention a contract not getting renewed? Well now you might have MNPI and not be allowed to trade. Best to keep out of the blackout windows, and be extremely careful.
• Reichhardt 5y ago
• bitcoinmoney 5y ago
  Serious question: how do you get caught if you sell these secrets in the black market?
• bitcoinmoney 5y ago
  Is it possible these guys bragged on social media and was snitched? Ohh boy
• bitcoinmoney 5y ago
  These guys deleted their LinkedIn.what a shame.