It seemed like they were very public with the brokerage about how the amazon employee controlled his family's brokerage accounts to make amazon trades.
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.
I would assume it's exactly this. You just filter down trade to those accounts that have either never purchases options in the past, or brand new accounts where that's the first trade AND where the options were highly profitable.
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.
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.
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).
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!
I thought it was interesting and inexplicable (to me) that she would even bother buying a handful of shares and then selling them based on insider information. It makes no sense to me that someone who already had that much money would want to waste her time and attention on making a few extra dollars.
I'm not saying it didn't happen, I'm just saying I don't understand why she would even be interested.
1) If you operate in the global super-elite you lose sight of the fact that actions can even have consequences. Especially before ubiquitous cell phone videos, you could scream obscenities at a poor store clerk and nothing would happen to you. There are very few things that $300 million can't buy your way out of.
2) There's a thrill of playing the stock market that's just like the thrill of playing the lottery or poker.
Yeah, and it's weird but it turned out that Al Capone jeopardized his entire empire over just not paying taxes on $100k in income. Strange that despite his incredible business acumen he committed this one small crime.
The problem is that when you report the income the IRS wants to know where it came from. If you can't rightly say that's a red flag of its own. So you either admit(or strongly imply) that you run a criminal enterprise or you evade taxes. Hidden option 3 is buying a laundromat and a couple of video game arcades.
I’ve always heard the IRS doesn’t care where your income comes from, just that’s it’s reported. IRS website even talks about how to report “illegal income” and “bribes”.
And the IRS has no authority beyond tax collection. They can’t do a (non-tax) criminal investigation.
The IRS accepts payments from those living illegally in the country. Not sure how it is now iirc proving a history of paying taxes was part of a successful naturalization process.
I had a friend go through naturalization. The illegal presence is dealt with separately, but the tax check is basically "Do you file taxes each year? Do you owe the IRS any money? Ok, you're good."
Except that was the one crime they could get him on. If that's the crime you have the evidence on, that's the crime you prosecute. Once he's in jail, he's in jail.
I think she gets a bad rap. Obviously being wealthy makes her unsympathetic, but that's peanuts. And they 'got' he for 'lying' and not for securities fraud -among the original charges.
But the thing is there are much bigger fish to fry --why not go after international investors who have sheel companies within shell companies, etc. But... I mean, I guess this is a career bump or bonus for someone doing investigations.
> 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.
I think I can extend it to Martha Stewart and Michael Flynn.
> In December 2017, Flynn formalized a deal with Special Counsel Robert Mueller to plead guilty to a felony count of "willfully and knowingly" making false statements to the FBI, and agreed to cooperate with the Special Counsel's investigation.
> In January 2020. Flynn moved to withdraw his guilty plea, claiming government vindictiveness and breach of the plea agreement.
> The United States Department of Justice announced that it intended to drop all charges against Flynn on May 7, 2020.
One strange thing about the Martha Stewart incident is that she was a Wall Street stockbroker, from 1967 to 1972. Probably she should have known the rules, but I'm mentioning this because it strikes me as unexpected.
That was part of the argument at the time: you aren’t a confused person, you were a registered professional. Clearly, it was also “we would like to make an example of someone high profile to discourage insider trading”.
Seems like an $850k investment for a $640k profit. So good, but not go to gaol good. Especially when it's split 3 or 4 ways as it seems this would have been.
That's not really how it works. Percentages only matter when you have other options that have similar return rates. 1.4M on 14M would be pretty good too.
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/
Several years ago I attempted to profit from earnings. I did much research, and would correctly guess beat or miss exptectation, but it seemed the movement afterwards was not correlated to the beat/miss, but more with the change in forward guidance. So, insiders can know the numbers, but if they don't also know the guidance, they can't really profit. Even then, the market would sometimes run in the opposite direction it should have given the news, or gyrate wildly until early the next day.
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 I invest? Yes, my compensation was in part Amazon stock. Pretty much everyone I knew also invested. What is timing if you don't plan to sell short term? As far as I can tell, this charge is about buying not selling stock.
It's about buying it with insider knowledge that the quarterly earnings call would be positive and lead to a rise in price. So the intent is to sell that stock when you know the price has gone up to guarantee a return. The issue is the knowledge they used to make that decision was not public record.
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.
That would be relevant if these were stocks bought at IPO, or bought and held for the long term. This situation was neither of those. AMZN fluctuates in the short term like any other stock.
Sort of true, but alsorts of issues can leap in unannounced and shoot your plans in the foot. You can prove in covid now but was it priced in in January, February, March, definitely by April for the majority.
> 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.
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.
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?
There is an obvious conflict of interest between the long term stability of the business and the actions necessary for the huge stock/options grants become profitable in the next few quarters. For example, when mergers and acquisitions should be approved, layoffs be announced, dividends increased, etc.
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.
I would not do this, because it is unethical. However, if there is a 5% chance you will get caught and lose 230% your profit margin, seems like a rational agent would do insider trading at every opportunity.
I imagine if you get caught once, the SEC is going to audit everything you've done and find most occurrences of insider training. Theres a 5% chance for each of those occurrences and you're going to owe a lot if any are found.
Not only that but if she’s in finance, the monitoring requirements for what you do on work machines is even higher. And as a child comment said, Amazon complied willingly. Nothing forced at all. It doesn’t want insider-trading either.
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.
Nah, you innately understand it! It's not a 1:1 relationship because a 2% drop of a stock will change the derivatives of that instrument in "imperfect" ways. The further away from the ground truth in anything, the more noise/variance/differing signal.
Options are awesome. When you are long options, you get massive leverage without the possibility of getting margin called while the price moves against you.
When you are short options you can take down the whole financial system with you.
Amusingly, this is part of why some folks are deeply terrified of Robinhood: with a few clicks here and there, you’ve just bought yourself 10-15x leverage.
I actually think it’s a great thing to let someone easily try out “let me try out options trading, I’ll start with $100”. The write ups about r/wallstreetbets though are sometimes heartbreaking.
So like you said, at least you know what you don’t know!
What are you talking about. Loss porn on r/wsb is great entertainment and scratches the “cautionary tale” itch very well. You can’t say that Robinhood users do that to themselves without consent at this point in time
Does robin hood actually allows you to leverage to the point where the loss is beyond your investment? Usually these platforms close/liquidate the position so the maximum you can lose is the money you bet.
Someone else can probably answer if Robinhood allows you to sell options short, but if you do, you can lose more than your initial purchase/deposit if the price moves faster than Robinhood can forcibly liquidate your position.
You would almost expect this to happen occasionally, if you’re not super careful, due to the massive volatility of options.
Being short out-of-the-money call options will expose you to a ridiculous downside if the stock makes an unexpected upwards move. Easily 10x-100x your deposit.
That can happen on quite a few other platform in theory but not in practice basically the platforms assume the risk in that case I remember that form the good ole days of online FX options and binary option trading in the late 2000’s.
Basically you always had forced liquidation or some sort of a hedge on the opposite leg that made sure you couldn’t lose more than the leveraged amount you’ve bet on.
Options go up/down in value at a different rate than the underlying stock. This is known as the "delta" (one of the "greeks"). More info here: https://www.investopedia.com/terms/d/delta.asp
A 2.87% change in the stock can move option values quite a bit. Example:
Options are effectively gambling on which way you think a stock will go, rather than traditional share investment, and has much bigger returns and losses.
Options aren't gambling, they're typically used to hedge your position, hence the 100:1 leverage. You can easily hedge out entire positions with just a few contracts.
Also, even though you misunderstood the leverage of options, the complaint doesn’t tell us what kind of price they’d bought in at either.
That is, the stock went up 2.87% the day after the earnings, but they had purchased it over the weeks beforehand (but kept adjusting their bet, both in scale and price). So even in “regular stocks” of 1:1 leverage, the SEC telling us only that Amazon shares went up 3% that day doesn’t tell us how much it went up from when they purchased their securities. Amazon stock had moved quite a bit during January 2018.
There are 2 kinds of options: calls and puts. Calls allow you the option to buy 100 of stock at a certain price any time before the option expires. Puts are the opposite, they allow you the option to sell 100 stocks for a certain price any time before they expire.
Note, that I said "option", you're not obliged to sell or buy stocks; however, if you let the option expire you lose the money you spent on the option.
I haven't bought options so I can't tell you exactly what the price of an option is relative to a share (some posters say 100:1), but it would have to be much less than the price of a share to be worth it. Since to make money from an option, the stock has to move enough to pay for the price of the option and if the option is too expensive, the stock price would have to move a lot.
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.”
>let’s not pretend this family didn’t violate the law here either.
No actually, let's do pretend this family didn't violate the law here. Let's assume that allegedly means just that. We have this crazy double standard in the US, we want to assume the police are incompetent, but then when they accuse someone we assume they are guilty.
How about we assume this is a competent accusation that may or may not be factual, and leave it to the courts to decide. Whether or not we believe the court system needs reform to make it more affordable/just is a valid point, but let's assume that by reading the Cliff's Notes (press release) of this case we don't know enough to decide guilt.
Edit: Courts should be affordable and just for all. I believe paying more shouldn't get you special treatment and not being able to pay shouldn't get you harsher judgements. The difficulty is in finding that balance.
Edit 2: Well shit I was wrong, I missed the part where they agreed to the charges? Not sure how that works, beyond my limited knowledge on the law, but.... it looks like they plead guilty.
Reading the linked press release answers your question.
> The SEC's complaint, filed in federal court in Seattle, charges all three Bohras with violating antifraud provisions of the federal securities laws. 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.
I assume that’s because there is a parallel criminal charge against the husband by the US Attorney. I’m not a lawyer so I don’t know the intricacies around the language used in this kind of statement, but allegation or not, the defendants agreed to the judgment and that let them be clear of any future charges in this case by the SEC.
>” 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.”
It isn’t alleged. They pled out.
There is a parallel charge against the husband by the US Attorney in the Western District of Washington, and the court can presume innocence there.
But I’m not a juror or a judge so I don’t have to make that same assumption.
Yeah, saw that after writing the comment. This was a doh moment. The tone of the first half of the article and the second half don't reconcile for me. I thought based on the first part that it was still ongoing. Missed the conviction part.
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.
> 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.”
These are not the same laws so it’s dumb to compare them. If Musk was caught front-running the market with trades before earnings them you would have a point.
I understand that these are not equivalent violations.
That said it's not dumb to say that the SEC sure seems to be very selective in which laws they actually enforce with teeth versus which ones they seem to just let slide.
If any other CEO had done what Musk has done, they would have been fired by their board, and hopefully the SEC would have fined them, and prevented them from serving as an executive in a publicly traded company again. It's absurd.
>If any other CEO had done what Musk has done, they would have been fired by their board, and hopefully the SEC would have fined them, and prevented them from serving as an executive in a publicly traded company again. It's absurd.
Do you have any evidence to back up you assertion that the SEC would have come down on others harder?
Being fired by your board has absolutely zero relationship to the SEC and is entirely dictated by the nature of power between the board and the CEO. If the CEO owns a controlling interest (or CEO+family), the board will have no teeth and will never fire him/her. Zuck won’t be fired and Bezos won’t be fired for the same reason.
He wasn't forced to buy stock. It was a PR move so that he was injecting cash equivalent to Tesla's portion of the fine. However, he got stock in return, diluting the rest of the shareholders, so it was quite bizarre.
Foregoing reimbursement for private jet travel for a few years would have made actual sense, if his intent was to not punish Tesla for his actions.
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%).
Remember the recent Twitter attack, where malicious actors were able to post from many high-profile & verified accounts? The attackers could've done just about anything. Moved stocks. Start World War 3. And all they did was try a cryptocurrency scam that netted them $couple-thousand.
Right, stocks go down after earnings all the time, even when earnings are good, because investors want to capture some of that value. There is often a pop a day or so later, but it's not so simple to time.
And given the relatively low amounts we're talking about in this case, even a perfectly-timed trade not be as beneficial since it is going to likely be behind those who are making the same trade in larger volumes at the same time.
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]
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[ 2.6 ms ] story [ 234 ms ] thread[1] https://www.sec.gov/litigation/complaints/2020/comp-pr2020-2...
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.
Basically really unlikely investing scenarios.
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.
You’ll see people who throw away their career over $30k.
2) There's a thrill of playing the stock market that's just like the thrill of playing the lottery or poker.
And the IRS has no authority beyond tax collection. They can’t do a (non-tax) criminal investigation.
Now, could they flag it for the FBI? Sure.
I had a friend go through naturalization. The illegal presence is dealt with separately, but the tax check is basically "Do you file taxes each year? Do you owe the IRS any money? Ok, you're good."
But the thing is there are much bigger fish to fry --why not go after international investors who have sheel companies within shell companies, etc. But... I mean, I guess this is a career bump or bonus for someone doing investigations.
woeirua said it best
https://news.ycombinator.com/item?id=24622010
> 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.
I think I can extend it to Martha Stewart and Michael Flynn.
> In December 2017, Flynn formalized a deal with Special Counsel Robert Mueller to plead guilty to a felony count of "willfully and knowingly" making false statements to the FBI, and agreed to cooperate with the Special Counsel's investigation.
> In January 2020. Flynn moved to withdraw his guilty plea, claiming government vindictiveness and breach of the plea agreement.
> The United States Department of Justice announced that it intended to drop all charges against Flynn on May 7, 2020.
https://en.wikipedia.org/wiki/Michael_Flynn
What kind of circus is this?
They're pretty ambitious
And not even good airline gift cards. Southwest Airlines.
If I'm going to jeopardize my career, it's not so I can fly free to Albuquerque.
† https://www.reviewjournal.com/investigations/2nd-former-lvcv...
$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.
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...
Did you invest? Did everyone you know invest? Did you time it as well as the alleged offender?
Yall take things waayyy too seriously to not understand the humour in stating the obvious of Amazon's stock price though.
We might have different definitions of "risen consistently".
AMZN traded as high as $105.06 in 1999 down over 94% to as low as $5.97 in 2001.
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.
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.
It wasn't insider trading, but it was financial fraud by a ceo.
> In a parallel action, the U.S. Attorney's Office for the Western District of Washington today filed criminal charges against Viky Bohra.
How does the SEC know this? Is it most likely browser history? Google account history? Corporate monitoring software?
https://www.google.com/search?q=AMZN
> 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.
> 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?
Thanks for the attempt at explanation at least haha. (Though to me, this sounds like a monopoly-money game, really odd concept).
When you are short options you can take down the whole financial system with you.
I actually think it’s a great thing to let someone easily try out “let me try out options trading, I’ll start with $100”. The write ups about r/wallstreetbets though are sometimes heartbreaking.
So like you said, at least you know what you don’t know!
You would almost expect this to happen occasionally, if you’re not super careful, due to the massive volatility of options.
Being short out-of-the-money call options will expose you to a ridiculous downside if the stock makes an unexpected upwards move. Easily 10x-100x your deposit.
Basically you always had forced liquidation or some sort of a hedge on the opposite leg that made sure you couldn’t lose more than the leveraged amount you’ve bet on.
A 2.87% change in the stock can move option values quite a bit. Example:
https://www.barchart.com/stocks/quotes/AMZN/volatility-greek...
That is, the stock went up 2.87% the day after the earnings, but they had purchased it over the weeks beforehand (but kept adjusting their bet, both in scale and price). So even in “regular stocks” of 1:1 leverage, the SEC telling us only that Amazon shares went up 3% that day doesn’t tell us how much it went up from when they purchased their securities. Amazon stock had moved quite a bit during January 2018.
Note, that I said "option", you're not obliged to sell or buy stocks; however, if you let the option expire you lose the money you spent on the option.
I haven't bought options so I can't tell you exactly what the price of an option is relative to a share (some posters say 100:1), but it would have to be much less than the price of a share to be worth it. Since to make money from an option, the stock has to move enough to pay for the price of the option and if the option is too expensive, the stock price would have to move a lot.
Fastest way to get nailed for insider trading, or anything shady. Just say no.
– Jeff Bezos
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.
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.”
No actually, let's do pretend this family didn't violate the law here. Let's assume that allegedly means just that. We have this crazy double standard in the US, we want to assume the police are incompetent, but then when they accuse someone we assume they are guilty.
How about we assume this is a competent accusation that may or may not be factual, and leave it to the courts to decide. Whether or not we believe the court system needs reform to make it more affordable/just is a valid point, but let's assume that by reading the Cliff's Notes (press release) of this case we don't know enough to decide guilt.
Edit: Courts should be affordable and just for all. I believe paying more shouldn't get you special treatment and not being able to pay shouldn't get you harsher judgements. The difficulty is in finding that balance.
Edit 2: Well shit I was wrong, I missed the part where they agreed to the charges? Not sure how that works, beyond my limited knowledge on the law, but.... it looks like they plead guilty.
> The SEC's complaint, filed in federal court in Seattle, charges all three Bohras with violating antifraud provisions of the federal securities laws. 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.
They've admitted guilt & culpability.
I would have assumed an press release wouldn't use the word alleged unless this was an ongoing case.
>” 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.”
It isn’t alleged. They pled out.
There is a parallel charge against the husband by the US Attorney in the Western District of Washington, and the court can presume innocence there.
But I’m not a juror or a judge so I don’t have to make that same assumption.
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.”
That said it's not dumb to say that the SEC sure seems to be very selective in which laws they actually enforce with teeth versus which ones they seem to just let slide.
If any other CEO had done what Musk has done, they would have been fired by their board, and hopefully the SEC would have fined them, and prevented them from serving as an executive in a publicly traded company again. It's absurd.
Do you have any evidence to back up you assertion that the SEC would have come down on others harder?
Foregoing reimbursement for private jet travel for a few years would have made actual sense, if his intent was to not punish Tesla for his actions.
His company always trades the stock.
> 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...
Which reading this complaint, sounds like the same dumb criminal mindset as these people.
Post a page saying you double btc because you stole too much and people throw btc at you.
And given the relatively low amounts we're talking about in this case, even a perfectly-timed trade not be as beneficial since it is going to likely be behind those who are making the same trade in larger volumes at the same time.
Moderately liquid
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...