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What Happens When a Fifteen Year Old Pumps and Dumps with a Net Profit of $800k? (2002)
- sarahwoodssarah 3y ago[dead]
- albertfredrick 3y ago[dead]
- wil421 3y agoHow is this any different than meme stocks on WallStreetBets?
- heartbl33d 3y agoOnly difference is he was doing this in the 90's. Today you will find telegrams pumping/dumping and manipulating the price of small stocks, crypto, etc.
- ghaff 3y agoI was doing some market research for a penny stock company in 2000 and made my way over to a stock discussion board devoted to the company at one point. The amount of scaminess, cheerleading, and ignorance (feigned or otherwise) was unreal.
- hyperhello 3y agoHe makes the case that this is no different from anything anyone does at all. The SEC is essentially a spam filter.
- williamDafoe 3y agoNo, Lewis argues that SEC is a protection racket! They make a bunch of rules and regulations with the input of Wall Street so that Wall Street can pump and dump legally!! Congress will not touch this radioactive protection racket because they are doing insider trading on legal changes which should also be illegal...
- ghaff 3y agoThis was a long time ago in a galaxy far far away. Also the article mentions these were thinly-traded stocks. I assume the argument would be that today this sort of thing is happening because it's Tuesday. i.e. it's normalized and if you get burned, it's almost someone's civic responsibility to part you from your money.
- gmd63 3y agoScammers who think it's their "civic responsibility" to dupe their fellow man with intentional fraud should think two or three times before committing to that logic. If they want to value someone's worth to the human team based on their gullibility to professional liars, it's not reaching very far for other like-minded logicians to value the scammers' worth based on their ability to navigate any other man-made stressor, like their ability to dodge a bullet.
- lebean 3y agoThe difference is merely the essential part of meme stocks that make them meme stocks and not just a pump-and-dump scheme executed by some guy. Other than that, though, totally the same thing.
- gmd63 3y agoI'm betting that large players manipulate the market through "meme stocks" just like advertisers astroturf reddit.
- seadan83 3y agoI'm on a phone, apology for lack of citation. I ran across an article that found it was mostly memers bidding the price up against each other. The short squeeze aspect did come un, but not as often and not to the extent that is commonly claimed.
- hiddencost 3y agoBoth are morally outrageous and are or should be criminal?
- bink 3y agoNot defending the sub but don't they have a market cap minimum for posts?
- wil421 3y agoSpeaking more about pump and dump not so much about penny stocks or near worthless stocks. The larger users certainly pumped up GME, one guy was even on the news channels when he made like $11 million. 100s of people would buy based on these types of super users suggestions.
- hilux 3y agoInteresting. A little googling turns up that 25 years later, he's still in the pump-and-dump business! Do what you love, I guess.
- cmcaleer 3y agoI found this Twitter account last posted to in 2014. https://twitter.com/lebedbiz https://twitter.com/lebedbiz I checked a good few of the stocks he listed. I figured he would have struck a lucky score at one point but he seemed to have an uncanny ability to always pick losing stocks. I was hoping for a happy ending like how many of the people I played Runescape with who hosted dicing games, speculated and flipped in-game assets became successful quants irl, but he sure did seem to just pick a gimmick and roll with it, never evolving or changing.
- Solvitieg 3y agoIs it safe to assume they transitioned to become an anonymous crypto trader around this time?
- shnock 3y agoReally? Merching in RS3 always seemed to be more of a pump and dump than anything that overlapped with real life quantitative investing
- Frummy 3y agoIf theyre working as quants now, they were probably around before RS3 as well. I remember daytrading the grand exchange personally. There were plenty of profitable patterns that were basically guaranteed to work. I can see how someone who could program at the time could get much higher volumes by automating multiple accounts. The problem was finding profitable new trades at different levels of wealth, what worked at one volume would have to be replaced eventually. I never got into clans and such. I got scammed a few times especially memorable was a scam with a sort of party of social proof around the scammer and they would rinse repeat in every world, some things were so organised that you got really surprised by the intricacy of the scams.
- falcor84 3y agoTL;DR: he argues that he did the same as everyone else on Wall street, so the SEC fines him $285,000, letting him keep more than half a mil of net profits. The system works as intended</sarcasm>
- arkades 3y agoThe SEC only found wrongdoing in eleven trades, whose profit netted approx $272K. They did not penalize him for trades not found in violation of the law. Clearly, too long, didn’t read.
- pierat 3y agoAgain, not a real court. And no jury, and basically a fake judge.
- falcor84 3y agoThe issue of which particular trades were in violation of the law doesn't appear to be that clear cut: > Michael Lewis, writing for New York Times Magazine, acknowledges that there were victims who suffered from Lebed’s actions, yet asserts that the SEC only settled because they believed they would not be able to win in court, and that its evidence was not as strong as it had alleged
- paulryanrogers 3y ago> Lebed professes that he did nothing wrong – he did nothing different from Wall Street analysts. He states that he learned how people react to the stock market and acted on that knowledge. So you trick people by lying to them, and it's ok because you take their money indirectly via the stock market. And because some analysts also do this (often suffering legal consequences), then it's definitely not wrong? Shameful. And the father getting the kid an E-Trade account after the mother closed his other account? Sounds like the father should be sanctioned too.
- twojobsoneboss 3y ago[flagged]
- EGreg 3y agoThe entire trading industry is a zero-sum game bro. For someone to win someone else has to lose. As is the advertising industry and surveillance capitalism industry that powers the “free web”. (Only at the edges is new value created. Most of it exists to have large institutionals take money from the small newbs, you’re the fish at the poker table.) And more broadly, capitalism exploits people. This is like blaming Andrew Tate for exploiting women but throwing up your hands when Amazon Nike and Apple were running sweatshops and warehouses at scale, exploiting people in general. Technology just made it easier to extract the rents (eg tax the uber drivers and passengers to pay the shareholder class of Uber). And generative AI just automates that further. Thanks for all your creativity, judgment and input, humans. You can be fired now thanks! Hey, if you look at the man behind the curtain, you’ll see all your favorite stuff needs it to even function. For example for Sam Altman’s ventures we have: Kenya’s cheap brains: https://time.com/6247678/openai-chatgpt-kenya-workers/ https://time.com/6247678/openai-chatgpt-kenya-workers/ Kenya’s cheap eyeballs: https://www.bbc.com/news/world-africa-66383325.amp https://www.bbc.com/news/world-africa-66383325.amp Don’t shoot the messenger
- voisin 3y agoI concur - we as a society have agreed implicitly (since I think around the 1980s) that it’s everyone for themselves so take whatever the hell you can for yourself, consequences be damned. If you’re lucky, you’ll be dead before the world burns and society devolves into chaos.
- deleted 3y ago[deleted]
- JoshGG 3y agoMichael Lewis wrote about this story in his book “Next”. Also in the New York Times magazine. The articles and book have some pretty interesting discussion and opinion about this case. https://www.umass.edu/cyber/readings/marcusarnold.htm https://www.umass.edu/cyber/readings/marcusarnold.htm
- Solvency 3y agoWhy is this page double line spaced? It's outrageous on mobile.
- chatmasta 3y agoThe page is from 2002, when "mobile" was pronounced "mob-eel" and the closest thing to a smartphone was an early version of the PalmPilot.
- sillysaurusx 3y agoOur friends pronounced it "carrying around our computer towers and setting up folding tables to play Planetside and Stepmania all night". I think it’s a regional thing.
- Bud 3y ago2002 was actually quite late in the Palm era. The iconic Palm V, for instance, dates back to 1999. And BlackBerry had a mature smartphone by 2002. Nothing compared to an iPhone of course, but quite capable.
- Solvency 3y agoI had plenty of my own webpages in 2002 and never had this weird double spacing. Ever.
- lolinder 3y agoReader mode?
- kube-system 3y agoIt was generated in MS Word 2000. Double spacing of Word docs is common at educational institutions.
- dehrmann 3y ago> Lebed professes that he did nothing wrong – he did nothing different from Wall Street analysts Except analysts usually can't trade stocks. Short sellers can. In theory, libel law makes that safe, but when it's a 15-year-old playing the penny stocks, the company won't notice or have the legal firepower to chase down a /r/wallstreetbets user.
- op00to 3y agoanalysts can trade stocks, though they are not supposed to trade counter to their recommendations.
- dehrmann 3y agoWhen I googled it, it was a little murky on if it's allowed, and sometimes it was the analyst's employer that banned it. What is legal is different parts of the same ~bank not being as independent as they should be, so the kid's argument that the big boys do the same thing wasn't entirely wrong.
- deleted 3y ago[deleted]
- fmajid 3y ago> Depending on who you talk to, Lebed was either viewed as a person who knowingly abused the system and broke the law, or someone who acted no differently than Wall Street analysts acted Both of these statements can be true at the same time.
- hunter2_ 3y ago> Depending on who you talk to, Lebed was either viewed as a person who knowingly abused the system and broke the law, or someone ... actually performing no wrong-doing. Funny how selectively quoting a bit differently makes that appear far less so.
- pierat 3y agoIt all comes down to selective enforcement by the not-actual-real-judges at the SEC. You have to go through their kangaroo court with an ALJ, and arger likely getting a judgement against you, can you actually go to a real court. And this is combined with different rules for different income classes. Kid from middle income family gets smacked down hard. Whereas billionaire employees doing work on wall street either get low scrutiny, or pay 2% of what they made (Read: cost of doing business). The "rights" of the rich are not for the rest of us.
- sdwr 3y agoIf you read the article, it looks like he got punished pretty lightly - had to pay back some of the gains, got to keep others, and had no further repercussions.
- neomantra 3y agoThe Supreme Court is considering if Administrative Law Judges (ALJ [1]) are unconstitutional. SEC v. Jarkesy. Fun fact: adherence to law is not required in an ALJ court. If one loses in ALJ, then one may proceed to appeal in a regular court where law must be considered. [1] https://www.law.cornell.edu/wex/administrative_law_judge_(alj) https://www.law.cornell.edu/wex/administrative_law_judge_(al...
- 3y ago
- mauvehaus 3y agoHe can afford college? In seriousness though: are analysts allowed to have an interest in stocks they're publishing analysis for? It seems like a fine line between creating an obvious conflict of interest (see: TFA perhaps on a more subtle level) and wanting them to have skin in the game so they're incentivized to provide useful analysis (rather than YOLO: stock goes up/down and I don't care because it's other people's money on the line). In general, it seems like a hard problem to compensate an analyst without either creating one of the above scenarios or generally setting up a scenario where they'd be better off trading for themselves on the basis of their analysis rather than providing a service to other investors.
- ghaff 3y agoFor both stock analysts and other types of analysts like IT industry analysts, it depends on the firm as far as I know and the rules may be more or less strict depending upon how involved they, or their fund, are with the given company. Generally, rules lean towards avoiding both conflicts of interest and the appearance of conflicts of interest.
- seadan83 3y agoThe difference, an analyst states if they have a long or short holding and if they intend to buy or sell in the future. The scammer does not, that is the key difference.
- _sword 3y agoAt virtually all banks, equities analysts are banned from trading in their coverage. Banned as in, if you, your spouse, your dependents, etc. have an interest you didn't proactively disclose and dispense with you're fired on the spot. FINRA regulation states that registered equities analysts (i.e. the ones working at banks) at a minimum cannot trade against their ratings [0]. At most / all banks there are further restrictions that ban trading in coverage. [0] https://www.finra.org/rules-guidance/rulebooks/finra-rules/2241?rbid=2403&element_id=11946 https://www.finra.org/rules-guidance/rulebooks/finra-rules/2...
- sour-taste 3y agoThere was a recent decision out of Texas that pump and dumps are legal if you do them without directly selling stock to the victims. So I guess that according to Texas what this guy did is totally fine! [PDF] https://assets.bwbx.io/documents/users/iqjWHBFdfxIU/rmMOgPQgozIw/v0 https://assets.bwbx.io/documents/users/iqjWHBFdfxIU/rmMOgPQg... or coverage from Matt Levine: https://www.bloomberg.com/opinion/articles/2024-03-21/pump-and-dumps-are-legal-now?srnd=undefined https://www.bloomberg.com/opinion/articles/2024-03-21/pump-a...
- giarc 3y agoWouldn't that mean that you can have a friend do the pump, and you do the dump? Sounds like the guy in the original article did both and therefore wouldn't be saved by that Texas ruling.
- kasey_junk 3y agoThe Texas ruling doesn’t (as far as the coverage I’ve read) require that level of separation. Rather just selling to “the market” is enough to insulate you from fraud charges.
- malfist 3y agoDo people actually direct sell stock? At least retail investors
- kasey_junk 3y agoNo. Even those that hold directly via a transfer agent don’t directly sell. If that court case holds there is no such thing as securities fraud.
- pcthrowaway 3y agoMaybe I'm wrong but I think people can use OTC trades for this (though OTC trading desks typically wouldn't share counterparty information IIUC)
- 3y ago
- stevenjgarner 3y agokentlaw.edu doesn't use SSL?
- mistrial9 3y agothis site also ? http://whois.educause.edu http://whois.educause.edu
- dataflow 3y ago> The messages that Lebed posted would predict marked increases in the stocks value [...] In response to Lebed’s messages, trading volume of these stocks would soar I'm so confused reading the comments here. How in the world is anyone defending this?
- darby_eight 3y agoIt's not hard to mock peoples' trust of the market.
- AnthonyMouse 3y ago> How in the world is anyone defending this? Suppose you're an ordinary trader who likes high risk bets. You find a stock you like, you buy some. Now you go on message boards telling everyone you think the stock is going to the moon straight away. This is your sincere belief. Soon the stock goes up 300%. You thought it was going to go up 1000%, that's what you said before, but hey, it still went up 300%, that's still a tidy profit, so you sell. Whether this is fraud or not basically hinges on whether you were being intentionally dishonest, right? But now how do you distinguish between malice and stupidity?
- dataflow 3y ago> Whether this is fraud or not basically hinges on whether you were being intentionally dishonest, right? No. Do you mean legally? or morally? Legally the offenses include things beyond what might strictly be "fraud" (see "fraud or deceit" as one example, but there are more [1]). IANAL, but failing to mention that your posts are with the hope of raising the price because you have a vested interest in that... seems like a material omission, if nothing else. Morally (and I'd expect legally based on the text, but IANAL) what matters is what he expected to happen as a result of his posts on the message board. If he knew people would likely buy the stock in response to his posts, and he intended to take advantage of that influence to make money off those sales, that's the end of the story. Whether he sincerely believed the stock would actually rise regardless is beside the point. > But now how do you distinguish between malice and stupidity? I'll assume you mean good faith because stupidity isn't in the picture here. Someone who's genuinely predicting the stock market correctly isn't stupid. Do you sincerely believe this person didn't expect his messages to raise the stock price, or that he didn't intend to take advantage of such a rise to make money off the stock sales? I sure don't. [1] https://www.law.cornell.edu/uscode/text/15/77q https://www.law.cornell.edu/uscode/text/15/77q
- xyst 3y agoRookie mistake. Always got to add in the fine print: "Not financial advice" and disclose current positions. You don't even need to say the exact positions (ie, long call option, X shares, ...). This is how the "stock analysts" on TV get away with it. When those credits role at the end of the segment, it will say something to this effect. Or TV show will disclose it at the bottom of the screen. It's a grift.
- d--b 3y agoHe was too early to the crypto party…
- daft_pink 3y agoI’m really curious if he is unable to trade when he gets older.
- ehaveman 3y agofrom the lewis article: > the kid had bought stock and then, ''using multiple fictitious names,'' posted hundreds of messages on Yahoo Finance message boards recommending that stock to others if that's not illegal it really should be.
- littlestymaar 3y agoIf A16Z are allowed to buy thousands of their own crypto-hype essay in order to get it listed on NYT best-seller and drive shitcoin prices up, I don't see why random netizens could not do the same kind of things… Of course we could ban both.
- decafninja 3y ago15 (or let’s say, 21yo) me would use $800k very differently than current 40yo me. 21yo me would make a beeline for the local Porsche dealership. 40yo me would not.
- Broge 3y agoP
- Broge 3y agoPower
- dehrmann 3y agoWhy porche when you can lambo /s But really, you don't get to have $800k by buying Porsches.
- listenallyall 3y agoLots of Porsches tend to increase in value, some older models, spectacularly so.
- decafninja 3y ago21yo me would not be sophisticated enough to realize that. But 21yo me would not be stupid enough to go for a Lambo too.
- midnight2 3y agoCrypto is basically this writ large. So many kids being taught that scamming is how to succeed
- TapWaterBandit 3y agoNot really, way more kids are getting caught in the crypto scams than are making money doing them.
- lazyasciiart 3y agoThe ones who got caught are still taking away the lesson that scammers win.
- Brian_K_White 3y agoSome people say with a straight face: "Hey if someone is stupid enough to believe something I say, it's not my fault, even if I say something I know is false." And enough other people like being able to cash in at that same well that they avoid working towards making it officially illegal with significant penalties. It's that John Oliver piece on timeshares all over the place in essentially every arena.