Insider trading: the classic white collar money-making scheme. Do it right, and you’ll amass a fortune. Screw it up, and you’ll wind up stamping out license plates and teaching ethics CPE from behind bars with Scott London. We're here today to tell you how NOT to get caught because who knows, some day you may make a really stupid decision.
Don’t connect with your informant on LinkedIn Between August 2013 and May 2014, two Australians made about $6.5 million USD on insider trading. Lukas Kamay, a National Australia Bank associate director, made “sizeable bets on the Australian dollar, minutes and sometimes seconds before the announcement of significant economic news.” How did the Aussies get caught? A foreign exchange broker noticed Kamay’s large and conveniently-timed trades. The broker also noticed that Kamay was LinkedIn to Christopher Hill, an Australian Bureau of Statistics employee, who was privy to non-public material information regarding the fluctuation of Australian currency. Both Kamay and Hill were arrested in May 2014. The investigation also revealed that Kamay and Hill were Facebook buds. GC Pro Tip: If you’re receiving and acting upon insider information, don’t connect with your insider on LinkedIn.
Don’t eat the evidence In March 2014, the SEC charged a stockbroker and a law clerk with insider trading that netted $5.6 million in illicit profits over four years. These smooth criminals didn’t hook up through LinkedIn because hooking up through LinkedIn is way too obvious. Instead, these two traded the information through a middleman. The middleman met the law clerk for coffee and wrote the relevant ticker symbol on a post-it note or napkin. Then the middleman would travel to the train station to meet the stock broker. After flashing the post-it note to the stock broker, the middleman ATE the post-it note. Nothing says “inconspicuous” like a grown man eating a post-it note in the middle of a train station. As expected, the middleman was also charged in the scheme.
Keep your mouth shut The SEC recently charged Filip Szymik and Jordan Peixoto for insider trading on Herbalife stock. These guys' names sound like contagious diseases so we'll spare you the whole story but the short of it is that Szymik got info from his roommate that he later blabbed to Peixoto. Szymik didn't even make any money insider trading and this dipstick still got charged.
Go big or go home If you’re involved in some hare-brained insider trading scandal, do it right. Don’t be the idiot who ruins his career for a mere $3,007 in profit like the sales managers at Qualcomm who were accused by the SEC of insider trading in May 2014. Don’t be Martha Stewart, whose infamous Imclone insider trading debacle saved her billion dollar fortune from a paltry $45,673 worth of losses. Who does that impress? No one. If you’re greedy enough to commit a felony, destroy your career, and disgrace your employer by trading insider information, at least make enough money to fund your own escape plan. Which leads us to…
ALWAYS have an escape plan. Not all schemes go as planned (in fact, they almost always end badly). If your informant has already endorsed you for Insider Trading on LinkedIn, it’s only a matter of time until you’re caught. Like every decent villain, you’ll need a foolproof escape plan:
Step One: Obtain your pilot’s license.
Step Two: Steal enough money or illicitly trade enough shares so you’ll never have to work again.
Step Three: Fly yourself to the Bahamas.
Sound far-fetched? Well, it worked for the FBI’s Most Wanted white collar criminal James T. Hammes, who famously embezzled $8.7 million as a controller at Pepsi and then narrowly escaped capture. James T. Hammes has never been convicted because James T. Hammes has never been caught. James T. Hammes is the quintessential white collar super villain, second only to the heart attack that took down Ken Lay in legendary-ness.
With these handy tips, you can illegally trade, make a small fortune, cover your tracks, and avoid capture.1
1 Not legal advice