Amateur insider traders

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Welcome to The Tipsheet, the Financial Times for aspiring scamsters

Did you dream of doing insider trading ever since you were a child? Did you skip pokemon and read about Ponzi schemes? If the answer is yes, then you’ve come to the right place. In this issue, how not to get caught when insider trading.


There are 3 things I hate:

  1. ESG fund managers who don’t plant a tree after farting during an ESG fund presentation
  2. Investors who don’t immediately chant at least Warren Buffett quotes after waking up
  3. People who don’t believe Suzlon is the new Apple & Google combined
  4. People who engage in shoddy insider trading

I explained how you could make Buffett rich money by manipulating stock prices in the previous issues. One way is to launch a ransomware attack on a listed company, short the company’s stock/buy puts, and reveal the ransomware attack. The stock will fall, and you’ll be Bill Gates rich.

The second way is to find lazy drunk journalists, convince them that Google is buying Suzlon, buy Suzlon and sell it as soon as the journalists publish that news story. Why? Because most journalists are often lazy and will publish any random nonsense.

The third way is to find celebrities and convince them to tweet that Elon Musk and Tesla are acquiring PC Jeweller and pivoting the company to Dogecoin mining.

But all these ideas take some effort.

But these are all innovative ways to make quick money in the markets and requires some brains. But not all scamsters have a high IQ. The good thing about global crime is that there’s no opportunity inequality, unlike traditional jobs where you need actual talent and need to do some work. Traditional jobs are racist and discriminate against people who have no IQ or don’t want to work hard.

For such low-IQ scamsters, insider trading is still a lucrative opportunity. It doesn’t take much effort either. Here are a couple of quick, easy ways:

  1. Create a tinder account posing as a hot girl or a hot guy. Yes, a guy too. Insider trading isn’t just for guys; that’s bloody sexist! Find a mid-level accounts employee of a listed company. Convince that employee that you’re his true love. Send DDLJ GIFs every day. After 37 days, start asking for things about the company and start buying calls and puts and become SRK rich.
  2. Find an accounting employee of a company. Find a secluded place, get your friend to crash his bike into the employee’s bike and ask him to run away. Take the employee to a hospital and save his life. After 23 days, once he recovers, start subtle emotional blackmail that you saved his life, become his best friend and ask for stock tips. Trade in the account of your tenant and your plumber. Become rich!

Despite all these easy pickings, it pisses me off to see scamsters fucking up insider trading opportunities like amateurs. Here’s a recent example.

Sean Wygovsky is based out of Canada and is a trader at a $19 billion hedge fund. Yesterday, The United States Department of Justice (DOJ) and The Securities and Exchange Commission (SEC) announced separate fraud charges.

Here’s how Sean got caught. Since he was a trader at a large hedge fund, he had advance information on all his firm’s trades. Given his firm’s size, he knew that the buy & sell orders would move the prices. So he started buying and selling stocks in the accounts of his relatives before his firm would execute trades. From January 2015 to April 2021, he executed over 600-700 trades in those accounts and made more than $3.6 million (~Rs 27 crores).

What an absolute idiot.

At times, WYGOVSKY personally conducted the trading on behalf of both the Employer Firm and the Subject Accounts.  For example, on occasion, IP log-ins from the Subject Accounts show the Subject Accounts were being accessed from locations where WYGOVSKY was travelling.  On other occasions, WYGOVSKY would cause others to execute the timely, profitable trading in the Subject Accounts.  Over an approximately five-year period, WYGOVSKY caused the Subject Accounts to engage in more than 700 such short-term timely, profitable trades, resulting in at least over $3.6 million of profits in the Subject Accounts. 

Financial Transfers Back to Wygovsky

During the course of the front running scheme, Relative-2 and Relative-3 caused at least approximately hundreds of thousands of dollars to be sent back to WYGOVSKY from the Subject Accounts.   For example, between 2015 and 2020, Relative-2 and Relative-3 moved millions of dollars from the Subject Accounts to bank accounts that they controlled, and wrote checks to WYGOVSKY and his immediate family members for hundreds of thousands of dollars.  Furthermore, in or about late 2017 and early 2018, Relative-2 and Relative-3 transferred hundreds of thousands of dollars to a Slovenian bank for the benefit of certain relatives of WYGOVSKY’s wife.  

DOJ

Time and again, insider traders get caught for silly mistakes after they’ve taken care of the hard parts. And most of the silly mistakes tend to be by Indians. Take the case of this CNBC Awaaz news anchor who used to run a popular stock tips show. Since he was popular, the tips he gave on his show actually moved stock prices. He felt that his salary wasn’t just enough and decided to take advantage of his moving power!

Before he gave his daily stock tips, he used to buy the same stocks in his wife and mother’s accounts and sell them after the prices rose on the day he gave the tips. He made nearly Rs 3 crores from doing this. He got caught, was fired, banned from the markets, and his accounts were frozen. This isn’t exactly insider trading but amateurish price manipulation, but the principle stands.

Perhaps, this case involving Nathaniel Brown and a few Indians deserves to be in the hall of fame for the stupidest insider trading case ever.

Nathaniel Brown worked in the accounting department at Infinera and had access to sensitive financials of the company. Before his company’s earnings, he used to tip Benjamin Wyalm, his best friend who was a high school teacher and a bookmaker. Gotta admit that’s the coolest fucking job description ever. I wonder what he taught his students about gambling:

“Students, gambling is bad unless your bookie is your favourite high school teacher.”?

Wylam not only traded for himself, but he also passed the same tips to Naveen Sood, who owed Wylam a couple of hundred thousand dollars in gambling debts.

I wanna pause for a second, and I wanna express my respect for Wylam. A high school teacher, a bookie and a genius debt collector. Just think about it. If your gambling client doesn’t pay you, give him some stocks tips, get him to make money and pay you back. Wah, hat tip, sir!

According to the SEC’s complaint, Nathaniel Brown, who served as the revenue recognition manager for Infinera Corporation, repeatedly tipped Infinera’s unannounced quarterly earnings and financial performance to his best friend, Benjamin Wylam, from April 2016 until Brown left the company in November 2017. The SEC’s complaint alleges that Wylam, a high school teacher and bookmaker, traded on this information and also tipped Naveen Sood, who owed Wylam a six-figure gambling debt. Sood traded on this information and tipped his three friends, Marcus Bannon, Matthew Rauch, and Naresh Ramaiya, each of whom also illegally traded on the information.

The SEC’s complaint further alleges that Bannon tipped Sood with material, nonpublic information concerning Bannon’s employer, Fortinet, Inc. As alleged in the complaint, Bannon learned in early October 2016 that Fortinet was going to unexpectedly announce preliminary negative financial results. Bannon allegedly tipped this information to Sood, who used it to trade. After learning the information, Sood tipped Wylam and Ramaiya, who also traded.

On August 5, 2016, Brown—whose tips enabled his friend, Wylam, to make nearly one million dollars—texted his then-girlfriend to inform her that he was going to Wylam’s house to, among other things, “talk to him about $.” One week later, on or around August 12, Brown took a photograph of numerous one hundred dollar bills spread across his bathroom sink

SEC

See, if you make a killing from insider trading, throwing money in your bathroom and taking a picture and posting on Instagram might not be a good idea. Even Matt Levine gave this dumb charade his usual treatment:

Yes yes yes if you have never traded options before, buying a ton of put options just before a bad earnings announcement does raise an obvious red flag, but so does sending your insider buddy a screenshot of your profits! So does taking pictures of the pile of hundred-dollar bills that you got as a payoff for your insider-trading tip! 

Ok, given the sheer stupidity of these aspiring scamsters, here’s how you properly do insider trading.

  1. Find a company target, preferably a small listed company and shortlist some employees who like to gamble or get drunk.
  2. If they like drinking, get them drunk, befriend them by introducing yourself with a fake name. Make sure you wear a hat, sunglasses and a fake moustache.
  3. Don’t wear anything identifying. For example, if you go to the meeting wearing Gucci underwear, and the elastic band with the brand is visible, the cops can use that to trace you.
  4. Never, ever trade in your own or relatives accounts. At best, in your wife’s second cousin’s third boyfriend’s ex-girlfriend’s account.
  5. Buy a cheap used phone. Install Tor Browser. Use VPN. Setup a Proton Mail account.
  6. Set up a tinder account. Swipe until you find a match. On your second date, get them to open an online trading account and a crypto account. What’s more romantic than stonks? Candlelight dinner and champagne my, ass!
  7. On the sixth date, start trading in their trading account.
  8. Make money.

This is the easy part. Now, for step 9, pay attention, cos this is the most important part. Now, the way you get the money out from your date’s account is not through UPI! You’ll get caught, dummy. Bitcoin is the choice of currency for criminals, but it’s not 100% anonymous. The FBI actually recovered $2.3 million worth of Bitcoin paid as ransom by Colonial Pipeline, which was recently hit with a ransomware attack.

The smart scamsters now use Monero (XMR). Buy XMR and then transfer to another wallet and redeem it after 6 months. Not immediately!

For cybercriminals looking to launder illicit gains, bitcoin has long been the payment method of choice. But another cryptocurrency is coming to the fore, promising to help make dirty money disappear without a trace. While bitcoin leaves a visible trail of transactions on its underlying blockchain, the niche “privacy coin” monero was designed to obscure the sender and receiver, as well as the amount exchanged. As a result, it has become an increasingly sought-after tool for criminals such as ransomware gangs, posing new problems for law enforcement.

FT

Most importantly, please don’t use the personal email that you used to set up a profile on a matrimonial website. In 2019, SEBI found a link on a matrimonial site in the Fidelity insider trading/front running case:

SEBI relied on usual information and documentation such as KYC records, passport details, and income tax PAN. Curiously enough, it also relied upon the listing in a matrimonial website to establish the identity of Avi, and the relationship between Avi and Alka. Unusual as it may seem, SEBI has previously embarked on similar exercises in establishing relationships in insider trading and front running cases, including by examining “friendships” on Facebook, as previously discussed on this Blog. This is inevitable given SEBI’s need to establish its case using several bits of circumstances evidence that are not material individually, but could work in the aggregate to prove one of the elements of a securities law violation at hand.

Some idiots are beyond redemption.

A challenge

Look, for aspiring scamsters, Insider trading is the easiest. You can see this from the fact there have no convictions for insider trading. But after you scam for a while, you get bored, and you need challenges.

Since insider trading is boring and doesn’t excite me anymore, here are my suggestions on how SEBI can root our insider trading once for all:

  1. Make insider trading legal.
  2. It should be legal even for SEBI employees and the Finance Minister.
  3. But SEBI should make it mandatory that all insider trades have to be announced 3 days in advance.
  4. All insider trading has to happen outside. If insider trading continues to happen inside, it should be punishable by death with a Guillotine.
  5. All employees of listed companies should be encouraged to do insider trading. People with the highest insider trades should be given awards in a public place and streamed on YouTube.
  6. There should be salary cuts for employees who don’t do insider trading.
  7. SEBI should hire a department full of convicted insider traders to find loopholes on how to do insider trading. They should be incentivised with 5-10% of all fines. You don’t catch thieves using cops. That shit, as we can see, isn’t working. You catch thieves using thieves.

Matters of debate

There’s been a long-running debate about whether insider trading investigations are worth the time and effort. On the one hand, critics of insider trading regulations point to the lack of resources for regulators like SEC and SEBI and the paltry number of convictions. So, these people have been advocating for the legalization of insider trading.

On the other hand, you have people who think that the government must provide financial regulators with more resources to stamp out insider trading.

Broadly, you have the libertarians and die-hard free-market people who are of the view that insider trading is a victimless crime and that it actually leads to increased market efficiency:

Economists have long known about the beneficial effects of insider trading. Up-to-date information is crucial for the proper functioning of a stock market, and insiders trade when stock prices, reflecting stale information, have diverged from reality. Insiders trade on newer information, nudging share prices toward reality and improving stock market efficiency. Still, it raises a thorny question: If insider trading is beneficial, where does the insider’s newfound wealth come from? Doesn’t it come from other investors who have been harmed? Why is it economically and morally acceptable for the insider to pocket the returns that would have enriched others?

Those are good questions, but careful analysis shows that, contrary to the popular view, investors who lose when insiders trade are even less deserving of the windfall profits than the insiders themselves. Insider-trading laws can be seen for what they truly are: governments pushing mistaken notions of fairness and punishing victimless “crimes.”

And you have the experts who think that insider trading damages the sanctity of fairness in markets and harms the functioning of markets:

Ross Levine, a professor of finance and banking at the University of California-Berkeley, said there’s evidence to show that insider trading can hurt the economy. “There are logical arguments to be made for not worrying too much about insider trading, but empirically, they’re outweighed by the fact that insider trading seems to damage the integrity and functioning of markets,” he said. For example, he said, if stock market outsiders believe they have less accurate information than insiders, they’ll perceive prices to be inaccurate and be less willing to invest in a particular firm, driving down the share price

Insider Trading and Innovation

Based on over 75,000 industry-country-year observations across 94 economies from 1976 to 2006, we find that enforcing insider trading laws spurs innovation—as measured by patent intensity, scope, impact, generality, and originality. Consistent with theories that insider trading slows innovation by impeding the valuation of innovative activities, the relationship between enforcing insider trading laws and innovation is much larger in industries that are naturally innovative and opaque, and equity issuances also rise much more in these industries after a country starts enforcing its insider trading laws.

I hope the regulators take my suggestion and make insider trading mandatory for all insiders, as long as they give 3 days notice. This will solve the problem and make the markets more liquid and more efficient too. Damn it, I’m so wise!


Adventures in cryptoland

In my previous issue, I had written about a way to make quick get Buffett rich money in crypto👇

But there is a way you can get rich even if you are just 15 years old. The only thing you need to know is how to code or a friend who can code. So, here’s how. You can create a DeFi project like IRON Finance. Let’s call it Magic Money Tree. Give out a generous token reward. Let’s call it the APUNBUFFETT coin. Now, there are plenty of crypto writers who’ll write anything you want for a few dollars. Pay a few to write articles that APUNBUFFETT coin will replace the Indian rupee and US dollar. Pay some of these influencers on Twitter & TIk-Tok to talk about the APUNBUFFETT coin.

The degenerate yield farmers will flock to Magic Money Tree to get APUNBUFFETT coin, and the price will go up. Since you created the project, you can either hold a lot of the supply of APUNBUFFETT coin, sell them and make money. Or leave a vulnerability and hack it once there’s a good amount of money and YOU BUFFETT. Since crypto is anonymous, you don’t have to worry about getting caught.

It looks like scammers are starting to take my advice. Last week, Safedollar, an algorithmic stablecoin, suffered an exploit, and the price crashed to zero. The hacker made away with about $248,000.

Same with another token called WhaleFarm. This was a $2.3 million scam.

Brilliant. So many talented scammers.

The best part about the last 3 exploits are the names – Iron Finance, SafeDollar, Whale Farm. They’re perfect! The first step of any scam is to convince the people it’s not a scam. You can’t do that with stupid fucking names like CUMROCKET, WHALEJIZZ etc.

A scam is a serious business. Be serious, scammers!


Continuations

Ransomware gangs are now offering discounts for payments in Monero:

On the Sodinokibi Tor payment site, the ransomware operators have already started to move away from bitcoin by making Monero the default payment currency.

If a victim wants to use bitcoin to make a ransom payment, the amount is increased by 10%.


Interesting thingies, tidbits, etc.

There’s always a catch when you chase yields in shitcoins

Over the past fifty years, to earn the median wage, a Mexican has had to sell an average of 700 grams of marijuana, 18 grams of heroin, or 66 grams of cocaine on the U.S. streets.

The new head of the Federal Trade Commission hates Amazon. Here’s her argument on why the current antitrust laws are inadequate that made her famous. Rough time ahead for Amazon?

The pandemic is causing more young people to become entrepreneurs. Good, there’s never been a better time to start a company with no business model.

Higher vaccination rates are causing Bitcoin prices to fall?

A magazine for HR people!

Preserving dead bodies amidst the pandemic is hard.

Nothing much. Just dancing robot dogs. No need to freak out!!!!

Mapping FDI flows

Apple generated $100 billion in revenues for 3 months ending December 31st🤯

Learning about how tech giants think about the future in patents

Shaming people sometimes is good?


Good reads

1. Long Vol: It’s Always Different

We measure volatility badly, our models are probably worse than we think, we’re inherently caught up in our own risk aversion, and so we — meaning, the collective “we” of human beings and asset owners — seek protection.  And that hunt for protection may actually have become the dominant feature of our markets.

2. Always Invert

The best life hack is to avoid dying.

Instead of trying so hard to be smart, we should invert that and spend more energy on not being stupid, in large measure because not being stupid is far more achievable and manageable than being brilliant. In general, we would be better off pulling the bad stuff out of our ideas and processes than trying to put more good stuff in.

George Costanza has his own unique iteration of the inversion principle: “If every instinct you have is wrong, then the opposite would have to be right.”

3. Pump and Dump and Pull the Rug

Still, my point in going through the mechanics like that is that DeFi seems to offer some real innovation in making these sorts of scams more efficient, predictable and reliable. Old-school finance relied on trust and messy human intervention; DeFi automates a lot of those processes, which can make scamming easier.

4. The Figures that Will Move the Venture Capital Market in the Next 3-5 Years

If you’re looking for one-handed economist like an exasperated President Truman, I’ll give you my view. I suspect the correction influenced by rates takes a few years to percolate through Startupland. As rates increase, the tide of venture dollars will inexorably ebb.

5. Prices and incentives – Cannot separate the two

Prices reveal preferences. Prices reveal incentives. This is even the case if there are distortions from government intervention. With government intervention, prices reveal the preferences and incentives of the government. 

Price changes, the adjustment of market opinions and preferences, generate actions or responses from markets.

5. Herd and Illusory Superiority Bias: Why Even Seasoned Investors Succumb

In general, anyone who makes an investment decision that’s backed by a thoughtful thesis believes the decision is correct and ideal. Unfortunately, our impression of what is ideal is often clouded by illusory superiority bias, leading to an incorrect interpretation of facts and an incorrect decision in turn. Sometimes, this investment bias even causes us to consciously or unconsciously ignore facts that don’t mesh with our thesis, again resulting in a decision that is less than ideal.

Illusory superiority bias doesn’t just affect accredited investors of stocks and cryptocurrencies. Venture capital and private equity firms with long track records of success can suddenly find themselves in unprofitable positions due to overconfidence in a particular strategy or method of analysis.

6. The Forever Virus

Most countries simply don’t have enough vaccines to go around, and even in the lucky few with an ample supply, too many people are refusing to get the shot. As a result, the world will not reach the point where enough people are immune to stop the virus’s spread before the emergence of dangerous variants—ones that are more transmissible, vaccine resistant, and even able to evade current diagnostic tests. Such supervariants could bring the world back to square one. It might be 2020 all over again.

7. “Follow Your Passion” Is Good Financial Advice

Spend less time tinkering with your investments — go for a walk, build a birdhouse, knit a sweater — the higher the likelihood you’ll be rewarded. The same is true of most things in life; at times you need to direct your focus elsewhere.

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