It is a good decision. He traded on insider information, he should not be able to get off because he tried to be clever and traded a different company’s stock.
Some observations. That guy must be a very decisive (or impulsive) person. He heard the news and decided on the alternate stock trick, found an alternate stock, found a suitable option on that stock and executed the trade all within seven minutes. Perhaps the merger was in the works for a while and he had been thinking and planning this for a while and just pulled the trigger when he heard the merger was approved.
Also, hners should know that they are getting a lot of value by reading that article. Apparently it was written by a team of eight lawyers, seven of which are partners! Considering the billing rates of toplaw partners, this humble article may easily represent 10k dollars of billable time!
IANAL but some clarifications people might find helpful.
An "interlocutory appael" is when the proceedings are stayed until the appeals court rules on a particular matter. During trial a judge needs to give leave to an interlocutory appeal, generally speaking.
It's always worth adding that appeals courts generally deal in matters of law not findings of fact. Trial judges make rulings on the law in the service of finding facts. A consequence of this is that verdicts aren't appealed, which a lot of people seem to think. You can't just appeal a guilty verdict because you don't like it. You need to find a basis, being where (in your opinion) the judge misapplied the law that had a material impact on the case.
Lastly, related securities are a common theme in investing and trading. For example, someone might buy Exxon and short Chevron. Why? Both companies move to some degree in relation to the price of oil. So you've effectively removed that variable. Now you're betting that Exxon will outperform other oil producers (Chevron in particular).
So this does seem to be anovel interpretation. I agree with the decision but it wouldn't surprise me if appellate courts end up gutting this interpretation.
There are a whole community of trading degenerates who trade 0-days till expiration (0dte) options all day long. Some of them claim they make money with black box algos. Those options move a little too fast to trade as a human unless you sit there with your finger on the sell button all day long.
I wonder if this is more about lighting up the gambling addiction thrill seeking and whatnot part of the brain than it is really about getting rich quick for some individuals.
You'll definitely get flagged because of the disproportionate non linear payoffs. But that's the point of call options. So some people do use them legitimately
As posted elsewhere, making $107k is illegal. Making $107M is legal. Lots of people made thousands, tens of thousands or hundreds of thousands. In aggregate, they made single-digit billions based on the losses Citadel had to report. DFV alone made north of ten million (realized then) and is up north of $200 million right now (currently unrealized gains).
> the SEC really seems to only go after small timers
Insider trading is a fuckwit sport. The N != NP asymmetry of executing an insider trade, profitably and discreetly, against the simplicity of looking for weird trades ex post facto leads most with money to conclude it isn’t worth it. The meme about the lawlessness of finance tends to be held by those furthest from it.
I humbly submit to you hypothesis that the lawlessness of finance is so pervasive that it has effectively become legalized through intellectual and regulatory capture. If you're interested in supporting evidence for this idea, check out how Enron sought and acquired SEC 'approval' for their ponzi instruments....
Most big timers also come out super bad, it's just you don't hear about these cases because it is almost never so dumb(the option trade this guy did is not hard to catch at all).
IIRC only Steve Cohen managed to battle back from catching an insider case.
In April 2022, Elon Musk bought 9.2% of Twitter. He was legally required to file a disclosure notice when his ownership exceeded 5%, but he didn’t. This allowed him to keep buying billions worth of stock for cheaper because the price immediately went up when his ownership became public.
Obvious violation of securities laws, with hundreds of millions in profit. Who knows if he’ll ever be held accountable. Musk seems to delight in mocking the SEC.
Congress exempts itself from insider trading laws. There is a 'Nancy Pelosi stock tracker' Twitter account that tracks Congressional buying and selling of stocks.
It seems to me (not a lawyer) that the definition of non-public in the jury instructions is a strong grounds for appeal. (Based on the summary of the instructions in the article.)
I work in finance, so I have had numerous trainings on NPMI from different points of view.
There are two things to address, and the framework to answer them is usually well know.
- Non-public: The general consensus I have seen is that if you are the one placing the trade, you should not be the one deciding whether the information is public. In simpler terms, if you have potentially NP information and are willing to trade it, let your compliance department decide whether it is public or not.
- Material: this one is harder to assess. For insider trading to trigger, there has to be a certain level of certainty of the information, and a certain level of impact on the price. This can be tricky to assess, if your boss is let go and you learn it, you have non public information, and I guess you could decide to short your company, because it's most likely not widely accepted as material, unless your boss is the Head of Research.
Anyway, the main takeaway is that whenever you are in a position to access sensible information, either trade under compliance approval, or don't trade at all. Everyone knows that, and the mere fact of not doing it is a signal of shady behavior IMHO.
> I work in finance, so I have had numerous trainings on NPMI from different points of view.
What point of view did you get training from other than the point of view of your company's compliance department? I've worked in trading for a long time and never got training from any other source.
Compliance should tell you to take a very conservative view of the law: they have basically nothing to gain from allowing you to trade in a gray area, but you might.
That doesn't mean the SEC or the District Court should take the same conservative view. They have to apply a balanced reading of the law and look at historical precedent.
How comes the SEC can even find something like that?
$120K in options trading win/loss is nothing. Peanuts.
It's also quite wild that this one is the case we hear about. There's obviously actual insider trading ongoing with proper amounts and not this $120K non-news event.
So how comes they even found him and how comes it's that minuscule, ridiculous, amount that gets reported and published everywhere?
On a big equity or index, $120K can be a single option contract on a 5% move in a single day (OK, 5% moves in a day aren't the most common but still).
And AFAIK there are millions (tens of millions?) of options contract exchanging hands daily.
> It’s automated. You look for high-entropy trades after receiving the filing announcing the corporate event.
So they find these dubious trades and then check the trader's trading history and personal wealth? Stuff like that?
Basically the trade is automatically flagged and then they notice, for example, that the dude hardly ever trades, never traded that stock, isn't familiar with $120K wins on a trade, etc.?
And if it all ticks, they then check which company he works for and it there's a relation with the company he traded?
I mean: it is amazing that they got him to me. But I find it also, in a way, quite spooky.
There's definitely a vibe in the comments in this thread, including from mine, about "going after the little guys".
The biggest no-no for trading is when you get information about a tender offer, that being one company buying another. Even if you're in the bathroom and you hear the guy in the next stall over talking about it on his phone you're not supposed to trade on that information because everyone knows that a potential tender offer is material non-public information.
> a potential tender offer is material non-public information.
Matt Levine discusses this sort of thing quite often in his Money Stuff newsletter. Under US law, the problem of insider trading isn't market manipulation, it's theft. Material non-public information obtained with a duty of confidentiality is considered the property of the company, and thus trading on it is misappropriation/theft of the company's secrets.
If you overheard news of a merger because two executives were chatting loudly in a cafe, then you'd have no duty of confidentiality and could trade freely. Likewise, in this particular case one central issue at trial was that the defendant placed trades in violation of his company's policies against trading competitors' stocks. It's unclear whether he could have been prosecuted if the company's policies had no such restriction.
European law, however, can take a more rigid stance against insider trading, more closely matching the intuition that trading on the material nonpublic information itself is bad.
A potential tender offer isn't always non-public though. The ones which are non-public are presumably less likely to be discussed somewhere as public as over a bathroom stall. If you as a random Joe unaffiliated with the companies in question don't know it's material non-public information then you can trade on it.
The other facts might matter, like if you bragged to somebody about the non-public information you overheard (or, as in this case, where you were a member of the company in question), but it wouldn't be a slam-dunk case if the only facts were trading on bathroom stall intel.
I don't know how the courts can decide on any verdict about any case when nothing makes any sense.
The entire economy is a massive government-centered money laundering scheme. Citizens of nations are burdened with trillions of dollars of debt that can never be repaid. On the flip side, corporate stocks are pumping almost indiscriminately due to money printing. We have a class-based system that is literally based on how much stolen/laundered capital you have accumulated.
It's weird how some types of stealing is allowed but not others. How does society decide what kind of stealing is OK?
It looks like you lack some understanding of how economy and finance work. I think instead of getting angry, you should spend a bit of time _genuinely_ trying to understand how the financial system works.
I would recommend you (legally ofc) download and read the CFA level 1 curriculum. It's a good helicopter view.
I did. I studied the global monetary system in detail. It's a scam. Let me summarize (as best as I can as it's surely the most elaborate scam, with the most unwitting collaborators that has ever existed):
The governments of all countries 'print' new money at a steady rate; simultaneously devaluing all their currencies. They do this by issuing bonds, some of those bonds are bought up by the markets but most bonds are bought up by reserve banks using money that they printed out of nothing (mostly digitally). This issuance of new money devalues the savings of regular citizens and, most importantly, their salaries listed on their work contracts which are denominated in the national currency.
The government debts of all countries keep increasing ad-infinitum along with the interest on that debt. More debt with more interest means that the governments need to keep issuing more bonds to get even more money to use to pay back the old debts plus interest, which then increases the debt even more and guarantees that more future money printing/borrowing is necessary.
Countries don't strictly need to tax citizens since they can just print money, but the reason they tax citizens is to help keep inflation under control by reducing the supply of currency floating around the economy. The fiat currencies of all countries are inflating but this is not noticeable (to traders, economists, etc...) so long as all currencies inflate at a similar rate; the foreign exchange rates will be stable.
Governments give out increasingly large contracts to large corporations to produce systems, weapons, etc... that add no value to citizens' lives but merely exists to control and passify them. People who are in close proximity to government money printers have access to easy money. Those who do not have to work hard for it. Look up Cantillon effects.
At current tax rates, money cannot hop far from the government's money printer. Consider that every transaction between citizens is taxed at some rate... Say 30% (a mix of income taxes, sales taxes...) Start with $100, see how much money is left after just 10 hops between different people. After 1 hop, $70 is left to spend, after 2 hops $49 is left, after 3 hops $34 is left... After 10 hops, only $2.80 remains from that 100 dollars!
So not only is all money created by the government (or banks that are backed by the central bank which is also a government entity), but the taxation system ensures that money cannot travel too far from that government. It's a closed loop with monetary abundance near the source and extreme scarcity at the periphery. It puts the Cantillon effect on steroids. All artificial, little to do with the so-called free market. How can big cities afford to accommodate millions of people working bullshit office jobs that add no value? Big cities, by virtue of having millions of people, control huge amounts of collateral, which gives them access to bigger loans and bigger gov contracts, which puts them in the front row of the money printers; which makes their capital holders the biggest beneficiaries of Cantillon effects... With those powerful Cantillon effects, the business elite can afford to be inefficient and sustain millions of bullshit jobs.
This is barely scratching the surface. I could write a book about it... But nobody would buy it... Because the media is monopolized and nobody would know the book exists. Not only that, but nobody who has money to buy the book has an incentive to understand this information... And they certainly won't be recommending it to their friends...
The system is basically as unjust as it can possibly be while still just barely avoiding being exposed as such. Society has become an epic PsyOp; complete with eugenics and elite selection; selecting for increasingly delusional, hypocritical and/or oblivious leaders who can continue running the system while it becomes increasingly dysfunctional.
The moment when a business leader starts to notice that something is off is the moment that they get replaced by someone who is even more delusional/oblivious and who can take the company/organization to the next level, unimpeded by common sense or principles.
For the next phase, I predict AI is going to make the economy and the monetary system even more complicated. It's going to be even more unjust and even harder to explain. AI will be able to create alternative realities for us. It will control the flow of information in ways that will keep us trapped in hermetically sealed filter bubbles.
There are millions of people suffering in silence whose opportunities have been stolen from them and they don't even know what's happening. The current system is absolutely immoral. Please point out any flaw in my arguments.
Ironically, with strong regulations from a neutral government, the conflict between the privileged billing class and the poor working class would not erode our society.
> The entire economy is a massive government-centered money laundering scheme.
This kind of shifts the blame away from the private sector which is actively undermining democracies.
> Citizens of nations are burdened with trillions of dollars of debt that can never be repaid.
Incorrect. Where is the money that had beem loaned by central banks and is now needed to keep infrastructur and our society in general afloat? Our f̵i̵s̵c̵a̵l̵ monetary system is a zero sum game in the end. So where did the money go?
> Incorrect. Where is the money that had beem loaned by central banks and is now needed to keep infrastructur and our society in general afloat? Our f̵i̵s̵c̵a̵l̵ monetary system is a zero sum game in the end. So where did the money go?
Most of that money which the government created comes back to the government via taxes. High taxes keep the loop short. Like I said, after 10 hops, with just 30% tax, $100 ends up being taxed down to $2.80... So say a corporation receives a $1 billion gov contracts, pays their executives and employees, then their employees pay rent to their landlords, then the landlords pay builders for renovations, etc... 10 hops and only $28 million remains of that 1 billion... $972 million is back in the government's hands whence it originated.
It's just a matter of time before that full $1 billion dollars has hopped its way right back into the government's hands via taxes.
"Our fiscal system is a zero sum game in the end."
That would be news to me?
Money is created all the time and also lost. The central banks try to keep prices stable, by influencing the rate in which money gets created, so why should it be zero sum?
(not a US citicen, though, but I belive the US central banking system works this way)
>This kind of shifts the blame away from the private sector which is actively undermining democracies.
This. Rants of the GP's type are pretty common after one gets an intro to the monetary system with a little bias thrown in. These are readily available on a YouTube near you.
They tend to be vague and talk about "the banking system" or "the economy" or "the government" being somehow corrupt or rigged, as if by design.
Thing is, they're not wrong that something is amiss, but it's not the systems in general. It's private people and corporations that are doing the rigging. Free flow of money into politics courtesy of Citizens United, regulatory capture, a purchased SCOTUS that now openly represents anti-democratic ideals and defangs government in favor of oligarchs, etc.
And, it's accelerating. Who'll even need regulatory capture anymore when you can just have SCOTUS nix the government's power to regulate?
These are the actual issues and their source is pretty clear. Through that lens, vague ideas about "the system" seem so egregiously obvious a distraction, they read like disinfo.
Readit News
Some observations. That guy must be a very decisive (or impulsive) person. He heard the news and decided on the alternate stock trick, found an alternate stock, found a suitable option on that stock and executed the trade all within seven minutes. Perhaps the merger was in the works for a while and he had been thinking and planning this for a while and just pulled the trigger when he heard the merger was approved.
Also, hners should know that they are getting a lot of value by reading that article. Apparently it was written by a team of eight lawyers, seven of which are partners! Considering the billing rates of toplaw partners, this humble article may easily represent 10k dollars of billable time!
An "interlocutory appael" is when the proceedings are stayed until the appeals court rules on a particular matter. During trial a judge needs to give leave to an interlocutory appeal, generally speaking.
It's always worth adding that appeals courts generally deal in matters of law not findings of fact. Trial judges make rulings on the law in the service of finding facts. A consequence of this is that verdicts aren't appealed, which a lot of people seem to think. You can't just appeal a guilty verdict because you don't like it. You need to find a basis, being where (in your opinion) the judge misapplied the law that had a material impact on the case.
Lastly, related securities are a common theme in investing and trading. For example, someone might buy Exxon and short Chevron. Why? Both companies move to some degree in relation to the price of oil. So you've effectively removed that variable. Now you're betting that Exxon will outperform other oil producers (Chevron in particular).
So this does seem to be anovel interpretation. I agree with the decision but it wouldn't surprise me if appellate courts end up gutting this interpretation.
Insider trading is a fuckwit sport. The N != NP asymmetry of executing an insider trade, profitably and discreetly, against the simplicity of looking for weird trades ex post facto leads most with money to conclude it isn’t worth it. The meme about the lawlessness of finance tends to be held by those furthest from it.
IIRC only Steve Cohen managed to battle back from catching an insider case.
Obvious violation of securities laws, with hundreds of millions in profit. Who knows if he’ll ever be held accountable. Musk seems to delight in mocking the SEC.
Not true [1]. (Enforcement leaves much to be desired.)
[1] https://en.m.wikipedia.org/wiki/STOCK_Act
There are two things to address, and the framework to answer them is usually well know.
- Non-public: The general consensus I have seen is that if you are the one placing the trade, you should not be the one deciding whether the information is public. In simpler terms, if you have potentially NP information and are willing to trade it, let your compliance department decide whether it is public or not.
- Material: this one is harder to assess. For insider trading to trigger, there has to be a certain level of certainty of the information, and a certain level of impact on the price. This can be tricky to assess, if your boss is let go and you learn it, you have non public information, and I guess you could decide to short your company, because it's most likely not widely accepted as material, unless your boss is the Head of Research.
Anyway, the main takeaway is that whenever you are in a position to access sensible information, either trade under compliance approval, or don't trade at all. Everyone knows that, and the mere fact of not doing it is a signal of shady behavior IMHO.
What point of view did you get training from other than the point of view of your company's compliance department? I've worked in trading for a long time and never got training from any other source.
Compliance should tell you to take a very conservative view of the law: they have basically nothing to gain from allowing you to trade in a gray area, but you might.
That doesn't mean the SEC or the District Court should take the same conservative view. They have to apply a balanced reading of the law and look at historical precedent.
In practice I assume this would be in breach of your employment contract?
We're talking about a petty $120K in profit for Panuwat according to several sources:
https://archive.is/SGklv
How comes the SEC can even find something like that?
$120K in options trading win/loss is nothing. Peanuts.
It's also quite wild that this one is the case we hear about. There's obviously actual insider trading ongoing with proper amounts and not this $120K non-news event.
So how comes they even found him and how comes it's that minuscule, ridiculous, amount that gets reported and published everywhere?
On a big equity or index, $120K can be a single option contract on a 5% move in a single day (OK, 5% moves in a day aren't the most common but still).
And AFAIK there are millions (tens of millions?) of options contract exchanging hands daily.
So, well, $120K... To me it's just seriously WTF?
It’s automated. You look for high-entropy trades after receiving the filing announcing the corporate event.
So they find these dubious trades and then check the trader's trading history and personal wealth? Stuff like that?
Basically the trade is automatically flagged and then they notice, for example, that the dude hardly ever trades, never traded that stock, isn't familiar with $120K wins on a trade, etc.?
And if it all ticks, they then check which company he works for and it there's a relation with the company he traded?
I mean: it is amazing that they got him to me. But I find it also, in a way, quite spooky.
There's definitely a vibe in the comments in this thread, including from mine, about "going after the little guys".
Matt Levine discusses this sort of thing quite often in his Money Stuff newsletter. Under US law, the problem of insider trading isn't market manipulation, it's theft. Material non-public information obtained with a duty of confidentiality is considered the property of the company, and thus trading on it is misappropriation/theft of the company's secrets.
If you overheard news of a merger because two executives were chatting loudly in a cafe, then you'd have no duty of confidentiality and could trade freely. Likewise, in this particular case one central issue at trial was that the defendant placed trades in violation of his company's policies against trading competitors' stocks. It's unclear whether he could have been prosecuted if the company's policies had no such restriction.
European law, however, can take a more rigid stance against insider trading, more closely matching the intuition that trading on the material nonpublic information itself is bad.
The other facts might matter, like if you bragged to somebody about the non-public information you overheard (or, as in this case, where you were a member of the company in question), but it wouldn't be a slam-dunk case if the only facts were trading on bathroom stall intel.
The entire economy is a massive government-centered money laundering scheme. Citizens of nations are burdened with trillions of dollars of debt that can never be repaid. On the flip side, corporate stocks are pumping almost indiscriminately due to money printing. We have a class-based system that is literally based on how much stolen/laundered capital you have accumulated.
It's weird how some types of stealing is allowed but not others. How does society decide what kind of stealing is OK?
I would recommend you (legally ofc) download and read the CFA level 1 curriculum. It's a good helicopter view.
Dead Comment
The governments of all countries 'print' new money at a steady rate; simultaneously devaluing all their currencies. They do this by issuing bonds, some of those bonds are bought up by the markets but most bonds are bought up by reserve banks using money that they printed out of nothing (mostly digitally). This issuance of new money devalues the savings of regular citizens and, most importantly, their salaries listed on their work contracts which are denominated in the national currency.
The government debts of all countries keep increasing ad-infinitum along with the interest on that debt. More debt with more interest means that the governments need to keep issuing more bonds to get even more money to use to pay back the old debts plus interest, which then increases the debt even more and guarantees that more future money printing/borrowing is necessary.
Countries don't strictly need to tax citizens since they can just print money, but the reason they tax citizens is to help keep inflation under control by reducing the supply of currency floating around the economy. The fiat currencies of all countries are inflating but this is not noticeable (to traders, economists, etc...) so long as all currencies inflate at a similar rate; the foreign exchange rates will be stable.
Governments give out increasingly large contracts to large corporations to produce systems, weapons, etc... that add no value to citizens' lives but merely exists to control and passify them. People who are in close proximity to government money printers have access to easy money. Those who do not have to work hard for it. Look up Cantillon effects.
At current tax rates, money cannot hop far from the government's money printer. Consider that every transaction between citizens is taxed at some rate... Say 30% (a mix of income taxes, sales taxes...) Start with $100, see how much money is left after just 10 hops between different people. After 1 hop, $70 is left to spend, after 2 hops $49 is left, after 3 hops $34 is left... After 10 hops, only $2.80 remains from that 100 dollars!
So not only is all money created by the government (or banks that are backed by the central bank which is also a government entity), but the taxation system ensures that money cannot travel too far from that government. It's a closed loop with monetary abundance near the source and extreme scarcity at the periphery. It puts the Cantillon effect on steroids. All artificial, little to do with the so-called free market. How can big cities afford to accommodate millions of people working bullshit office jobs that add no value? Big cities, by virtue of having millions of people, control huge amounts of collateral, which gives them access to bigger loans and bigger gov contracts, which puts them in the front row of the money printers; which makes their capital holders the biggest beneficiaries of Cantillon effects... With those powerful Cantillon effects, the business elite can afford to be inefficient and sustain millions of bullshit jobs.
This is barely scratching the surface. I could write a book about it... But nobody would buy it... Because the media is monopolized and nobody would know the book exists. Not only that, but nobody who has money to buy the book has an incentive to understand this information... And they certainly won't be recommending it to their friends...
The system is basically as unjust as it can possibly be while still just barely avoiding being exposed as such. Society has become an epic PsyOp; complete with eugenics and elite selection; selecting for increasingly delusional, hypocritical and/or oblivious leaders who can continue running the system while it becomes increasingly dysfunctional.
The moment when a business leader starts to notice that something is off is the moment that they get replaced by someone who is even more delusional/oblivious and who can take the company/organization to the next level, unimpeded by common sense or principles.
For the next phase, I predict AI is going to make the economy and the monetary system even more complicated. It's going to be even more unjust and even harder to explain. AI will be able to create alternative realities for us. It will control the flow of information in ways that will keep us trapped in hermetically sealed filter bubbles.
There are millions of people suffering in silence whose opportunities have been stolen from them and they don't even know what's happening. The current system is absolutely immoral. Please point out any flaw in my arguments.
> The entire economy is a massive government-centered money laundering scheme.
This kind of shifts the blame away from the private sector which is actively undermining democracies.
> Citizens of nations are burdened with trillions of dollars of debt that can never be repaid.
Incorrect. Where is the money that had beem loaned by central banks and is now needed to keep infrastructur and our society in general afloat? Our f̵i̵s̵c̵a̵l̵ monetary system is a zero sum game in the end. So where did the money go?
Most of that money which the government created comes back to the government via taxes. High taxes keep the loop short. Like I said, after 10 hops, with just 30% tax, $100 ends up being taxed down to $2.80... So say a corporation receives a $1 billion gov contracts, pays their executives and employees, then their employees pay rent to their landlords, then the landlords pay builders for renovations, etc... 10 hops and only $28 million remains of that 1 billion... $972 million is back in the government's hands whence it originated.
It's just a matter of time before that full $1 billion dollars has hopped its way right back into the government's hands via taxes.
“Fiscal usually refers to government finance” [1]. By definition, the government can create and destroy money by fiat. It is not a zero-sum system.
[1] https://en.m.wikipedia.org/wiki/Fiscal
That would be news to me?
Money is created all the time and also lost. The central banks try to keep prices stable, by influencing the rate in which money gets created, so why should it be zero sum?
(not a US citicen, though, but I belive the US central banking system works this way)
This. Rants of the GP's type are pretty common after one gets an intro to the monetary system with a little bias thrown in. These are readily available on a YouTube near you.
They tend to be vague and talk about "the banking system" or "the economy" or "the government" being somehow corrupt or rigged, as if by design.
Thing is, they're not wrong that something is amiss, but it's not the systems in general. It's private people and corporations that are doing the rigging. Free flow of money into politics courtesy of Citizens United, regulatory capture, a purchased SCOTUS that now openly represents anti-democratic ideals and defangs government in favor of oligarchs, etc.
And, it's accelerating. Who'll even need regulatory capture anymore when you can just have SCOTUS nix the government's power to regulate?
These are the actual issues and their source is pretty clear. Through that lens, vague ideas about "the system" seem so egregiously obvious a distraction, they read like disinfo.