That's not correct. He gained $550k by selling his stock. That was money he could have cashed out at any time.
By trading on insider information, he saved himself $117k in future losses (though not really because over time, I'm sure the stock will fully recover if it hasn't already). Thus the fine of $117k claws back everything that he gained due to his insider trading.
Plus, an additional $55k in fines. Plus who knows how much in lawyer fees. And then of course a criminal record that won't help with future employment prospects.
The law doesn't care how stupid your plan was. You could plan a theft in the middle of the day stealing $5 and still be a crime
Insider trading is trading with the knowledge of privileged information not available to public investors. If he did it, it's a crime. Doesn't matter if he made $50 million or $5.
Obviously I don't condone insider trading, but it's nice to see someone go all in and make some real money. If you're going to risk jail time, you might as well do it for life-changing amounts of cash.
Contrast this with Stephen Buyer who's going to trial and may well end up in jail for a piddly few $100k.
Keep in mind the scores of business icons who have been caught insider trading seemingly insignificant amounts of money.
Martha Stewart “avoided a loss of $45,673 by selling all 3,928 shares of her ImClone Systems stock on December 27, 2001, after receiving material, nonpublic information from Peter Bacanovic, who was Stewart's broker at Merrill Lynch.” (wiki)
The Galleon Group case ensnared Rajat Gupta (former head of McKinsey), who provided insider information that helped Galleon Group net a $17 million profit by tipping them off about Warren Buffett’s investment into Goldman Sachs during the 2008 financial crisis. Galleon Group’s owner, Raj Rajaratnam was a billionaire at the time of the insider trading.
SAC Capital (Stephen A Cohen’s firm, now known as Point 72) was charged with using insider information to generate $275 million in profits and averted losses. Cohen is a multi billionaire.
I recommend reading The Chickenshit Club. Given the institutional and resource constraints on regulators and prosecutors, the odds that you actually are punished are slim. Leaving aside any potential political machinations, behavioral economics resource has shown that humans generally value avoiding losses much more than making more money. Behavior like the endowment effect comes into play here. Bottom line, what may seem like pocket change for billionaires may cause “irrational” behavior.
If guilty, it's a joke that they only have to pay a penalty instead of going to jail. It means it's rational for everyone to try insider trading at least once, knowing that if you fail the worst that can hapepn is you lose your profits.
This is a good opportunity to point out that insider trading is a victimless crime. If you sell stock with insider knowledge, you sell it to someone who would have happily bought it at the same price or possibly a higher price from someone else anyway. The same is true if you buy stock with insider knowledge. The only net effect of insider trading is to make the market more efficient by pricing in otherwise inaccessible information.
Cheating the market usually doesn't work. Selling before a downturn looks good on paper, but timing the market is extremely difficult and you usually still lose, even with insider information. If you include the risk of getting caught, it's an absolutely insane proposition. I'd guess that selling as an insider trader almost never works out financially.
That may influence the sentence or fines the judge chooses to levy, but it doesn't change whether or not it was a crime. And I don't think it changes the moral dimension, either.
It is just so easy to get caught, this kind of insider trading is just the classic dumb criminal crime. And at the end you only made $100k at the very high chance of some algorithm in the SEC easily detecting what you did.
There are probably more lucrative and/or less risky ways of making illicit money.
This analysis is pretty poor. The insider trade made a million dollars in a day. The author is arguing that he could have alternatively made $10mm in two years if he hadn't have sold.
But of course $1mm in a day is a much better return than $10mm in 2 years. And of course the trader's money wasn't sitting idly since this trade -- he was probably making other illegal trades based on non-public info -- so in the end his return might have been much higher than if he had bought and held after the private information became public.
>According to the U.S. Securities and Exchange Commission (SEC), Stewart avoided a loss of $45,673 by selling all 3,928 shares of her ImClone Systems stock on December 27, 2001, after receiving material, nonpublic information from Peter Bacanovic, her broker at Merrill Lynch. The day following her sale, the stock value fell 16%.[49]
Martha Stewart went to jail for 5 months for a meager case of insider trading. Musk manipulated Tesla stock in front of, literally, the whole world and got a slap in the wrist (i.e. a fine that comes to about 0.1% of its net worth). A citizen would to go jail forever for a similar thing.
I can't see how this can't be seen as deliberate insider trading.
He bought over 13 million shares after March 24 (when he should have made his 5% public) and before he disclosed and the price went up by $10. This saved him $130 Million by buying from people that didn't know he'd made a large purchase.
I'm not sure what's the point of that analogy since insider trading is specific to traded securities.
If the accusations are true, then he might be guilty of illegal insider trading, because he sold shares after learning of non-public information that would affect the stock price. It's not necessary to prove that the buyers suffered a loss, but it can be argued that the sale was unfair to them: they bought without knowledge that there would be a big sale soon after.
Without jumping into the rest of the fray in this discussion, it does seem plausible for someone to profit while still losing part of their net worth, if the loss that they would have otherwise incurred is less than they otherwise would have due to an unfair advantage due to their position.
If a person were to use insider information to sell off their stock just after the value of it began to plummet, they would still be guilty of insider trading regardless of the end result of the stock crash on their net worth.
If a were a millionaire, I wouldn't risk prison for 200k. Even the litigation to avoid prison could cost 100k.
And this is the kind of thing you know all angles will be looked into (it took a news agency a few hours to unearth this).
If he did it (insider trading), he is very stupid.
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