Here's a neat insider-trading story #1530730 from Matt Levine, who has -- rudely -- been on vacation and left us stock-stackers/financial market maniacs starved for weeks:
That's a caricature example of dumb insider trading: clear, available messages about the trades; a sudden weird trading behavior that led to extreme profits; and indications of kickback to the insider.
Obvs, most SEC insider trading cases won't be like that, but it's astonishing how many of those components are usually involved. That could just be selection: the stupid insider traders get caught, the smart ones neither you nor the SEC have ever heard of.
perhaps it means that most insider traders are smart, and only the dumb ones get caught. If you have never bought options before, and suddenly you put all your money into short-dated out-of-the-money call options on a merger target, probably an alarm bell rings at the US Securities and Exchange Commission, and they show up and ask to look at your phone, which is inevitably full of texts with a banker on the deal.
The story Levine talks about here is Gavin Wolfe, a retired investment banker who now runs his own $260m portfolio, and Jason Satsky, a former colleague of Wolfe working on certain merger deals.
- not junior idiots making silly mistakes
- trades in size (one-fifth of the guy's respectably endowed (!) portfolio)
- no messages or evidence traces whatsoever
ALL that happened was that
“the two men attended a nationally televised [Duke] basketball game together at Madison Square Garden,” [4] and that “Within minutes of the November 9 basketball game ending, after spending approximately three hours with Satsky at Madison Square Garden, Wolfe created a calendar entry for himself at 12:12 a.m. that read ‘SJi and njr,’ using the New York Stock Exchange ticker symbols for South Jersey [Industries Inc., the merger target] and another company. He scheduled the entry for 9:15 a.m. that morning, November 10, 2021.” And then in fact he started buying the target’s stock.
Another possibility is of course that they are just friends who watched some basketball together, and that a former utility investment banker running a $260 million personal portfolio might have had his own reasons for investing in a local utility company
“he bought stock in a merger target the day after sitting with the target’s banker at a basketball game” sounds bad, but it doesn’t prove anything.
"Either it’s an innocent coincidence or it’s pretty good insider trading."
Whatcha think, stackers?! Clever high finance peeps running insider trading without any incriminating trace?!
google tracks everything and everyone. that's what is obvious from this story.
It sounds like the more insider trading a person does the less likely they are to be caught (behavior wouldn’t appear abnormal), especially if the kickback arrangement is entirely informal.