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Twilio employees, associates charged with insider trading by SEC

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Re: Twilio employees, associates charged with insider trading by SEC

#261

Post by nullc »

refurb wrote: post #248
ffggvv wrote: post #113

Earlier quoted context omitted.

my guess is if they did everything via in person discussions and didnt leave a paper trail of messages, they likely wouldnt have been caught

Matt Levine wrote some good articles on how people get busted. The main point is you can't buy or sell securities without identifying yourself. So when someone opens a new account and buy out-of-the-money call options that expire a few days after an earnings announcement it's not hard for the SEC to flag all those. Then all they have to do is look up that person and see if they have any connection to the company. The…

I think an element people miss is that to make more than negligible amounts of money from this stuff, you generally need to invest large amounts or or make the trades many time, or both. ... and this generates a pretty strong signal.

"Hmm. This guy just bet his entire account on a crazy bet and won" or "Hmm. This guy flipped a coin and it came up heads 20 times in a row."

Re: Twilio employees, associates charged with insider trading by SEC

#262

Post by harry8 »

Bedon292 wrote: post #243
harry8 wrote: post #228

Earlier quoted context omitted.

Because her husband is the person making their trades? That seems pretty far from "weak" to me. https://www.businessinsider.com/nancy-pelosi-discloses-stock...

They have to disclose when family members make the trades, as shown by the article you posted. So its not really clever when it still gets disclosed. And something like having a spouse do the trades certainly isn't either. That's easy for the SEC to check too. But what evidence is there that any of that is trading on non public information? I just lists off some of the most popular companies out there to invest in. T…

Pelosi knows whether google are going to have a whole bunch of very expensive anti-monopoly regulation get up. She might even influence that. Her assessment of the prospects of competing regulation is non-public and could change when she has a shower. She is right in the non-public information /by/ /definition/. And when she says she won't let her family financial interests affect her judgement do you believe that?

It's not "illegal" for her to tell her husband to buy google and then work to kill that regulation. There is zero prospect of her being prosecuted if you could prove that beyond all doubt.

Smell that stench wafting out of Washington. Got nothing whatever to do with R v D so we need to make sure we bring up republicans here to kill any chance of reforming the endemic (yet legal) corruption.

I simply don't believe you can regulate something you own. If you do, sure, that's your opinion and you are entitled to it. I believe that regulatory intent is non-public, that seems pretty clear tbh. I believe her husband would know if she had the knives out for google to take one example as he would know if she was going to make sure they aren't going to run into regulatory issues. Disagrees, sure, but there's not much to talk about beyond that. Maybe an illustrative example helps.

If you traded based on knowledge learned from the CEO of google that he'd privately met with Pelosi and she was onboard for google to do anything it wants without any further regulation while simultaneously she publicly claimed she was going to regulate them back to the 1970s. You can go to jail for trading on that information, so can the CEO, and yet she can't. I hope you can see the point now.

Re: Twilio employees, associates charged with insider trading by SEC

#263

Post by nullc »

kasey_junk wrote: post #42
sneak wrote: post #30

Earlier quoted context omitted.

No, it's only illegal if you are using secret information accessed with privileged insider access. If you do research and deduce nonpublic (secret) data and use that, that is fine. The classic example is inferring sales data from customer traffic by observing the parking lot utilization at regular intervals.

This is an American interpretation of insider trading laws which are very much not about keeping markets fair rather they are about preventing shareholders (or those working on their behalf) from stealing from other shareholders. Other jurisdictions have different presumptions about what insider trading laws are for and may thus interpret them in different ways. This was a US jurisdiction filing so the former standar…

I'm curious if there are places where monitoring how busy business parking lots and trading on your analysis would be unlawful insider trading?

Re: Twilio employees, associates charged with insider trading by SEC

#264

Post by refurb »

nullc wrote: post #261
refurb wrote: post #248

Earlier quoted context omitted.

Matt Levine wrote some good articles on how people get busted. The main point is you can't buy or sell securities without identifying yourself. So when someone opens a new account and buy out-of-the-money call options that expire a few days after an earnings announcement it's not hard for the SEC to flag all those. Then all they have to do is look up that person and see if they have any connection to the company. The…

I think an element people miss is that to make more than negligible amounts of money from this stuff, you generally need to invest large amounts or or make the trades many time, or both. ... and this generates a pretty strong signal. "Hmm. This guy just bet his entire account on a crazy bet and won" or "Hmm. This guy flipped a coin and it came up heads 20 times in a row."

Exactly.

I have no idea if it would work, but having a few years of making similar trades (some winners/some losers) likely helps stay off the SEC's radar.

A track record of buying and selling similar options in similar amounts is much more explainable than only contributing a few thousand to your Roth IRA by buying ETFs, then suddenly making a few hundred thousand on your first options purchase that so happened to be in a single company that a LinkedIn contact works for.

By the time the SEC is knocking on your door asking questions you're already screwed.

Re: Twilio employees, associates charged with insider trading by SEC

#265

Post by trhway »

denimnerd42 wrote: post #145
extr wrote: post #8

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 anyo…

sounds like they went back to China and got new jobs. https://www.crunchbase.com/person/bonan-huang

absolutely honest :)

"He used to work for United States JP Morgan Chase, Capital One, Jimu.com (as Strategy Analytics Director). Bonan mainly focusing on data mining, machine learning and programming large data quantification in analysing stock."

Re: Twilio employees, associates charged with insider trading by SEC

#266

Post by rosndo »

tharkun__ wrote: post #238
economist9374 wrote: post #202

Earlier quoted context omitted.

> From a cultural standpoint, many people do not trade on insider information because it is seen as unfair or immoral Is it immoral to trade on material nonpublic information you happened to overhear in a restaurant?

I would argue that: yes, it is immoral. Is it likely for you to get caught for insider trading? Probably not. Especially if you're Joe Blow and you make 10k on this. If you are Joe Blow making 10k also means you did not have a lot of "play money" to act upon overhearing some random conversation. Or you do but didn't trust it fully (how did you know it was 'material' and not just some guys at a business lunch 'boastin…

>I would argue that: yes, it is immoral.

>Is it likely for you to get caught for insider trading? Probably not.

Overhearing something in a restaurant and trading on it is not illegal insider trading.

For the purposes of this conversation it would be useful for you to have the most basic understanding of what constitutes illegal insider trading.

Re: Twilio employees, associates charged with insider trading by SEC

#267

Post by MichaelBurge »

fshbbdssbbgdd wrote: post #239
MichaelBurge wrote: post #139

Earlier quoted context omitted.

If insider trading is legal, you could actively destroy a company from the inside and profit from its downfall. Like you could buy put options to set up a leveraged short position, take all the company's money, set it on fire in public(or make a stupid acquisition so you can't easily be sued by other shareholders), watch the stock price drop in a predictable manner, and profit from the predictable decrease in equity.…

The “set it on fire” part seems like the part that you want to ban, regardless of whether insider trading is legal.

There are so many ways they could implement the same thing.

K-mart could stop marking everything "on sale" 100% of the time and make the regular price the discounted price, so people don't feel like they're getting a good deal. Then their sales collapse and they go out of business, because consumers are robots with predictable emotions.

Or the board could look for the absolute worst CEO they can find, thinking to themselves "This guy will surely bankrupt the company if we give him control", and then have all the written documentation being reasons why he's a great CEO and put out press releases bragging about him.

If you look at executives loading up on put options and say "surely that proves intent", then they'll instead call up their old Harvard buddies at Goldman Sachs and tell them all the reasons the new CEO's going to be great. They'll take the hint and load up on puts on his behalf, then 10 years later give him a cushy job at the hedge fund.

Maybe they wouldn't do it to a successful company. But if a company starts declining, has a couple bad quarters... the executives start looking for an "exit strategy", and you just legalized a whole class of them if they accelerate the decline as long as it's too hard to prove intent.

If you try to ban specific examples and legalize the general principle, they'll spend years of their life arranging for companies to be bankrupted in ways that are hard to prove illegal. There'll be documented "good reasons" for everything, but despite that they will be millionaires and their companies failures.

You can't look at the most obvious case and say "we'll just ban that". It's not how these people work - they are reading the law and planning around the edge cases.

Re: Twilio employees, associates charged with insider trading by SEC

#268

Post by kasey_junk »

55555 wrote: post #240
kasey_junk wrote: post #219

Earlier quoted context omitted.

Not many? Describe the trade steps necessary to insider trade with high leverage that isn’t trivial for a data analytics program to flag with high confidence?

1. Find out using inside information that Twilio is having a good quarter due to macro conditions 2. Buy deep OTM call options in… a similar company that’s in the same business as Twilio 3. Never get in any trouble

It’s literally a running gag on Matt Levite’s newsletter that all the SEC needs to do to keep their enforcement quota up is to search their database for any deep OTM option trades around earnings announcements.

Re: Twilio employees, associates charged with insider trading by SEC

#269

Post by kasey_junk »

extr wrote: post #256
kasey_junk wrote: post #219

Earlier quoted context omitted.

Not many? Describe the trade steps necessary to insider trade with high leverage that isn’t trivial for a data analytics program to flag with high confidence?

I don't find it hard to imagine. 1. Work for a company that provides signal-giving infrastructure for a variety of companies across disparate industries. Twilio is actually a perfect example. 2. Find someone to work with that already has or is willing to build a plausible history of so-so trades. 3. Occasionally tip this person off that company Y in industry X is about to have a good quarter. Never trade the same com…

That provides extremely low edge for both parties involved. Your participant with a history of trades could just as easily do research using public information (company press release aggregation is a classic version) to get similar edge without entering a criminal conspiracy.

Notice I mention high leverage. There are 2 challenges (as I see it) to committing insider trading. The first is having information ahead of time that actually predicts how the market will move based on the information. It’s not enough to know a company will have a good quarter you need to know it will be better than expected.

Second you need to be able to make outsized returns on that information. You have to beat the market returns by themselves. This compounds with the other issue above. The less obviously market moving data you have the more leverage you need.

This narrows the search space pretty considerably for an analytics based approach. You look at insiders with lots of access or anyone making high leverage bets.

Finally, do a mental exercise on your step 2. What does that even look like? An insider randomly approaching hedge funds? A random encounter at a bar? A frat reunion where they share each other’s trading history like term papers?

Re: Twilio employees, associates charged with insider trading by SEC

#270

Post by refurb »

extr wrote: post #256
kasey_junk wrote: post #219

Earlier quoted context omitted.

Not many? Describe the trade steps necessary to insider trade with high leverage that isn’t trivial for a data analytics program to flag with high confidence?

I don't find it hard to imagine. 1. Work for a company that provides signal-giving infrastructure for a variety of companies across disparate industries. Twilio is actually a perfect example. 2. Find someone to work with that already has or is willing to build a plausible history of so-so trades. 3. Occasionally tip this person off that company Y in industry X is about to have a good quarter. Never trade the same com…

How do you get the profit into your hands?

Cash? Bitcoin?

Will this other person keep their mouth shut when the SEC comes knocking because some very successful traders seems to be handling a lot of cash or crypto? Or will they flip on you to stay out of prison?

Read up on Matt Levine's many, many examples of people getting busted for insider trading.

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