Lol, when I work for JPM IB tech in NYC, I opened a ssh tunnel just to be able to listen to my mp3 collection at home. infotech emailed asking me wtf I was doing with my tunnel. They know everything. Sorry to say that.
From the complaint, it was OTM calls and puts, but it seemed like they were trying to decide how much to go in.
> 42. Prior to the completion of Bohra’s initial review, her Husband had purchased 500 Amazon shares in put options in his account on January 8. These put options had an expiration date of February 16, 2018, and they represented his expectation that Amazon’s stock price would fall by that date.
> 48. During this same period, Bohra’s Husband sold the put options that were held in
his account and instead purchased both Amazon common stock and Amazon call options in his account as well as accounts belonging to Bohra’s Father-in-Law and Bohra’s Mother-in-Law, now betting that Amazon’s stock price would increase.
> On the morning of January 22, 2018, Bohra’s Husband again logged in from his home and sold the 500 Amazon shares in put options that were in his account and replaced them with a purchase of 1,000 Amazon shares in call options. That afternoon, Bohra’s Husband logged in from his workplace to purchase 4,000 Amazon shares in call options in his account; 2,000 Amazon shares in the same call options in one of Bohra’s Mother-in-Law’s accounts; 1,000 Amazon shares in the same call options in another of Bohra’s Mother-in-Law’s account and 1,000 Amazon shares in the same call options in Bohra’s Father-in-Law’s account. The call options purchased that afternoon had the same strike price and expiration date.
> 51. Over the next few days, Bohra’s Husband and Bohra’s Father-in-Law continued to purchase Amazon common stock and call options, selling call options they had purchased on January 22 and 23 and replacing them with new call options at higher strike prices that they purchased on January 24, 25, and 26, and on February 1.
> 53. By the time that Amazon’s fourth fiscal quarter and year end 2017 earnings was
11 announced on February 1, 2018, Bohra’s Husband and Bohra’s Father-in-Law had spent more than $850,000 on purchasing Amazon call options and common stock in order to trade, at least in part, based on the material nonpublic information that Bohra had provided.
> 56. On February 1, 2018, after the market closed, Amazon announced its fourth fiscal quarter and year end 2017 earnings. The next day, February 2, 2018, Amazon’s stock price increased 2.87% over the prior day’s closing price.
> 58. In total, accounts belonging to Bohra’s Husband, her Father-in-Law, and her
10 Mother-in-Law made a profit of approximately $664,000 by trading Amazon common stock and Amazon call options ahead of Amazon’s fourth fiscal quarter and year end 2017 earnings announcement.
These kind of things just make me laugh, I mean the lifetime earning potential for someone in this persons position is so high, and they blew it to make a quick 1M.
Reminds me of the Apple compliance lawyer busted for insider trading, I believe last year[0]
1.4M in profits? Doesn't that seem like chump change? Like if you had insider information couldn't you buy options a make much more? Assuming your info was guaranteed to play out predictably. And if it wasn't is it really any better than general speculation?
Ah, the Bohra family was smart, you see. If they only traded out-of-the-money options, and only in “small” amounts, the SEC computers (which have nothing better to do all day...) will never catch on!
It is quite hard to profitably trade on earnings, even if you know what the financial results of a company will be. Try your own luck/skill in the Insider Trading Game: https://insider-trading-game.netlify.app/
I'm guessing they look for accounts that suddenly start making a series of extremely profitable short term investments in a particular stock, then notice a bunch of linked accounts (having a history of transfers between each other) also suddenly making the same series of extremely profitable trades and only profitable trades. That's a red flag. After raising that red flag it wouldn't take a rocket scientist to notice the other linked account in the set that has made zero trades but receives a regular monthly paycheck direct deposit from the company in question.
Most people only try to commit major fraud once, and hence aren't very experienced at doing it. The IRS and SEC encounter major fraud constantly, and hence are very experienced at spotting it.
Scale favors the regulator when it comes to automated detection tools.
Re: SEC, Brokerages ask if you’re related to an officer/director/10%+ owner of a publicly-traded company when you open an account. I don’t think they actively monitor these people, but they’ll be looked at if there’s unusual trading activity.
Usually what happens in these cases is accounts with no/little activity suddenly have unusual options trading activity, like buying way OTM weekly calls that always profit. These transactions get flagged and reviewed and if they notice a pattern with names or something, it’s not that hard for them to put the pieces together.
They can't catch you unless you're a total idiot. Buying a bunch of short dated OTM options that no one else even wants using an account that rarely trades options was probably the dead giveaway.
For those wondering “really, they had the Amazon earnings ahead of time and only made $1.4M?” this reminded me of a good Matt Levine writeup about a group of folks who obtained massive numbers of earnings reports ahead of time [1]. Having the clear knowledge of the earnings report doesn’t give you perfect knowledge on how to trade it / the reaction!
> Their performance is statistically significantly greater than that of random choice. However, the difference is economically small. For example, only 31% of earnings announcements traded by the informed traders fell within the tail deciles. About 70% of their informed trades missed the biggest stock price return opportunities. They traded earnings announcements with an average absolute return of 5.15%. The average earnings announcement return in the tail deciles is 11.3% (median 9.2%).
This family will likely be ruined by these charges. Even if they successfully defend against these charges, the lawyer fees will wreck them financially.
Meanwhile, Mr. Musk has literally gotten a slap on the wrist for multiple flagrant violations of securities law. There are definitely two justice systems in the US. The ultra-rich do not play by the same rules that you and I do.
This is absolutely true but let’s not pretend this family didn’t violate the law here either.
Like, there should be a middle ground between “if you’re rich enough, you get away with anything” and “it’s acceptable for a person in finance to share insider information with family members so they can profit.”
> Even if they successfully defend against these charges
They’ve already admitted culpability:
“All three Bohras have consented to the entry of final judgments permanently enjoining them from further violations of the charged provisions, and ordering them to pay total disgorgement of $1,428,094, total prejudgment interest of $118,406, and total penalties of $1,106,399.
In a parallel action, the U.S. Attorney's Office for the Western District of Washington today filed criminal charges against Viky Bohra.”
Using material information from your white-collar job to do some inside trading isn't the go-to example for the "two justice systems" of the US. You'd have to be immensely privileged, almost certainly in the top 10% income/wealth bracket for the entire USA, to have access to & be able to effectively act on this information. To put it in other terms: this person wasn't a capitalist, but they were a member of the professional-managerial class. I'm not shedding any tears.
It is funny that high management is never considered to be doing illegal insider trading (except for obvious missteps), but they're the ones responsible for capital allocation, stock/option grants, and all kinds of decisions that will impact financial results in the next quarter.
And their trades are typically scheduled in advance and public. Their job and fiduciary duty is to maximize shareholder value, and they make decisions so that happens. If that means allocating $ and rewarding people that will attain that goal, then what should be considered illegal?
Adam Rogas, who abruptly resigned from NS8 earlier this
month, is accused of misleading investors who poured in
$123 million to his company earlier this year, a deal in
which he allegedly pocketed more than $17 million.
These are show prosecutions. The really big frauds have been going on so long that the SEC will look foolish if they bring them down. This is just showing that they are doing something.
Too bad Matt Levine is out, I'm sure he would have a good time talking about just how terrible an idea this was. I assume these fools went with the classic "buy a shit ton of illiquid and thinly traded OTM options" route.
See my quotes from the complaint. They definitely seemed to have transacted a lot, made a decent amount of money, but they mustn’t have been that out of the money (they put in like $800k to make another $600k, so they probably traded in the money but with upside).
As alleged, the family reaped illicit profits of approximately $1.4 million from their unlawful trading in Amazon securities.
Did anyone really need insider information to know Amazon stock was going to rise?
Although $1.4 million is life changing amount of money, I feel like for these people who were already being generously compensated in Amazon stock, it probably wasn't worth the risk, especially given the quote below.
Laksha Bohra, the SEC’s civil complaint alleged, ignored numerous reminders from Amazon not to divulge confidential financial information or to illegally trade in the company’s securities based on what she knew about the company’s financial position — even after a former colleague pleaded guilty to insider trading in 2017, earning him six months in prison. [1]
> Did anyone really need insider information to know Amazon stock was going to rise?
1. The complaint also lists allegations of profits made from put options.
2. Many of the other allegations in the complaint are also for short term options, which wouldn't really be helped at all by a long-term expectation of a rise in Amazon's stock. These are bets on single day movements made upon earnings announcements.
3. Legally, it doesn't matter if the inside information was plausible or implausible, helpful or unhelpful. All that matters is that a trade was made using privileged information that isn't available to the rest of the market.
If it really is widely known that a stock will definitely rise at some point in the future, that very quickly gets priced into the stock price now. It goes up gradually as confidence that it will go up goes up.
Haha, that's funny. But no, usually with options the hard part is pricing it accurately. So, for instance, if you look at AMZN for next July, you'll see the options are very expensive. AMZN may well rise but unless you know better you will still lose money on OTM calls.
That's because the option has a time value (which depreciates by theta) and a stock correlation (which says how much it goes up by an increase in the stock). You need the stock to go up faster than the market currently believes it will in order to make money on OTM calls.
TANSTAAFL. You can't just buy OTM options and make money.
[+] [-] eel|5 years ago|reply
How does the SEC know this? Is it most likely browser history? Google account history? Corporate monitoring software?
[+] [-] kache_|5 years ago|reply
[+] [-] mrbonner|5 years ago|reply
[+] [-] boulos|5 years ago|reply
> 42. Prior to the completion of Bohra’s initial review, her Husband had purchased 500 Amazon shares in put options in his account on January 8. These put options had an expiration date of February 16, 2018, and they represented his expectation that Amazon’s stock price would fall by that date.
> 48. During this same period, Bohra’s Husband sold the put options that were held in his account and instead purchased both Amazon common stock and Amazon call options in his account as well as accounts belonging to Bohra’s Father-in-Law and Bohra’s Mother-in-Law, now betting that Amazon’s stock price would increase.
> On the morning of January 22, 2018, Bohra’s Husband again logged in from his home and sold the 500 Amazon shares in put options that were in his account and replaced them with a purchase of 1,000 Amazon shares in call options. That afternoon, Bohra’s Husband logged in from his workplace to purchase 4,000 Amazon shares in call options in his account; 2,000 Amazon shares in the same call options in one of Bohra’s Mother-in-Law’s accounts; 1,000 Amazon shares in the same call options in another of Bohra’s Mother-in-Law’s account and 1,000 Amazon shares in the same call options in Bohra’s Father-in-Law’s account. The call options purchased that afternoon had the same strike price and expiration date.
> 51. Over the next few days, Bohra’s Husband and Bohra’s Father-in-Law continued to purchase Amazon common stock and call options, selling call options they had purchased on January 22 and 23 and replacing them with new call options at higher strike prices that they purchased on January 24, 25, and 26, and on February 1.
> 53. By the time that Amazon’s fourth fiscal quarter and year end 2017 earnings was 11 announced on February 1, 2018, Bohra’s Husband and Bohra’s Father-in-Law had spent more than $850,000 on purchasing Amazon call options and common stock in order to trade, at least in part, based on the material nonpublic information that Bohra had provided.
> 56. On February 1, 2018, after the market closed, Amazon announced its fourth fiscal quarter and year end 2017 earnings. The next day, February 2, 2018, Amazon’s stock price increased 2.87% over the prior day’s closing price.
> 58. In total, accounts belonging to Bohra’s Husband, her Father-in-Law, and her 10 Mother-in-Law made a profit of approximately $664,000 by trading Amazon common stock and Amazon call options ahead of Amazon’s fourth fiscal quarter and year end 2017 earnings announcement.
[+] [-] gavinray|5 years ago|reply
> Amazon’s stock price increased 2.87% over the prior day’s closing price.
> In total, accounts belonging to Bohra’s Husband, her Father-in-Law, and her 10 Mother-in-Law made a profit of approximately $664,000
Am I stupid?
$850,000 * 1.0287 = $874,395, which is $24,395 profit.
Where are the other ~$640,000 coming from?
[+] [-] icelancer|5 years ago|reply
Fastest way to get nailed for insider trading, or anything shady. Just say no.
[+] [-] Whymess|5 years ago|reply
– Jeff Bezos
[+] [-] syspec|5 years ago|reply
Reminds me of the Apple compliance lawyer busted for insider trading, I believe last year[0]
https://www.google.com/amp/s/www.cnbc.com/amp/2019/10/24/app...
[+] [-] Topgamer7|5 years ago|reply
[+] [-] mikestew|5 years ago|reply
[+] [-] huac|5 years ago|reply
[+] [-] bredren|5 years ago|reply
You’ll see people who throw away their career over $30k.
[+] [-] disown|5 years ago|reply
$1.4 million within a few weeks/months for clicking a few buttons? No. It seems like a great deal.
> Like if you had insider information couldn't you buy options a make much more?
Yes you could make a lot more. But if you open an extraordinarily large OTM position, everyone and their grandmother would pick up on it.
[+] [-] celticninja|5 years ago|reply
[+] [-] mrkeen|5 years ago|reply
[+] [-] samfisher83|5 years ago|reply
[+] [-] ozten|5 years ago|reply
[+] [-] curiousgal|5 years ago|reply
[+] [-] yodon|5 years ago|reply
Most people only try to commit major fraud once, and hence aren't very experienced at doing it. The IRS and SEC encounter major fraud constantly, and hence are very experienced at spotting it.
Scale favors the regulator when it comes to automated detection tools.
[+] [-] advisedwang|5 years ago|reply
[1] https://www.sec.gov/litigation/complaints/2020/comp-pr2020-2...
[+] [-] quickthrowman|5 years ago|reply
Usually what happens in these cases is accounts with no/little activity suddenly have unusual options trading activity, like buying way OTM weekly calls that always profit. These transactions get flagged and reviewed and if they notice a pattern with names or something, it’s not that hard for them to put the pieces together.
[+] [-] smabie|5 years ago|reply
[+] [-] boulos|5 years ago|reply
> Their performance is statistically significantly greater than that of random choice. However, the difference is economically small. For example, only 31% of earnings announcements traded by the informed traders fell within the tail deciles. About 70% of their informed trades missed the biggest stock price return opportunities. They traded earnings announcements with an average absolute return of 5.15%. The average earnings announcement return in the tail deciles is 11.3% (median 9.2%).
[1] https://www.bloomberg.com/amp/opinion/articles/2019-11-26/kn...
[+] [-] woeirua|5 years ago|reply
Meanwhile, Mr. Musk has literally gotten a slap on the wrist for multiple flagrant violations of securities law. There are definitely two justice systems in the US. The ultra-rich do not play by the same rules that you and I do.
[+] [-] filmgirlcw|5 years ago|reply
Like, there should be a middle ground between “if you’re rich enough, you get away with anything” and “it’s acceptable for a person in finance to share insider information with family members so they can profit.”
[+] [-] TedDoesntTalk|5 years ago|reply
They’ve already admitted culpability:
“All three Bohras have consented to the entry of final judgments permanently enjoining them from further violations of the charged provisions, and ordering them to pay total disgorgement of $1,428,094, total prejudgment interest of $118,406, and total penalties of $1,106,399.
In a parallel action, the U.S. Attorney's Office for the Western District of Washington today filed criminal charges against Viky Bohra.”
[+] [-] acchow|5 years ago|reply
[+] [-] unknown|5 years ago|reply
[deleted]
[+] [-] i1856511|5 years ago|reply
[+] [-] ahelwer|5 years ago|reply
[+] [-] hansdieter1337|5 years ago|reply
[+] [-] vmception|5 years ago|reply
Moderately liquid
[+] [-] hnracer|5 years ago|reply
[+] [-] t0mmyb0y|5 years ago|reply
[+] [-] coliveira|5 years ago|reply
[+] [-] justchilly|5 years ago|reply
[+] [-] IncRnd|5 years ago|reply
It wasn't insider trading, but it was financial fraud by a ceo.
[+] [-] mrich|5 years ago|reply
[+] [-] celticninja|5 years ago|reply
[+] [-] mdoms|5 years ago|reply
[deleted]
[+] [-] smabie|5 years ago|reply
[+] [-] boulos|5 years ago|reply
[+] [-] jakupovic|5 years ago|reply
[+] [-] ponker|5 years ago|reply
[+] [-] notional|5 years ago|reply
Did anyone really need insider information to know Amazon stock was going to rise?
Although $1.4 million is life changing amount of money, I feel like for these people who were already being generously compensated in Amazon stock, it probably wasn't worth the risk, especially given the quote below.
Laksha Bohra, the SEC’s civil complaint alleged, ignored numerous reminders from Amazon not to divulge confidential financial information or to illegally trade in the company’s securities based on what she knew about the company’s financial position — even after a former colleague pleaded guilty to insider trading in 2017, earning him six months in prison. [1]
[1] https://www.seattletimes.com/business/amazon/feds-charge-sea...
[+] [-] mdoms|5 years ago|reply
Did you invest? Did everyone you know invest? Did you time it as well as the alleged offender?
[+] [-] kube-system|5 years ago|reply
1. The complaint also lists allegations of profits made from put options.
2. Many of the other allegations in the complaint are also for short term options, which wouldn't really be helped at all by a long-term expectation of a rise in Amazon's stock. These are bets on single day movements made upon earnings announcements.
3. Legally, it doesn't matter if the inside information was plausible or implausible, helpful or unhelpful. All that matters is that a trade was made using privileged information that isn't available to the rest of the market.
[+] [-] TallGuyShort|5 years ago|reply
[+] [-] renewiltord|5 years ago|reply
That's because the option has a time value (which depreciates by theta) and a stock correlation (which says how much it goes up by an increase in the stock). You need the stock to go up faster than the market currently believes it will in order to make money on OTM calls.
TANSTAAFL. You can't just buy OTM options and make money.
[+] [-] unknown|5 years ago|reply
[deleted]