He worked at Starbucks and would overhear traders bragging about their crimes in queue.
Also, it's not like actual illegal behavior is uncommon when it's hard to prove, and it's not like a lot of people aren't proud of it. Watch Jim Cramer's interview with Jon Stewart as an example and the reaction to Wolf of Wall Street as another.
In business school, a friend asked me to recommend firms where he could do some quiet insider trading by tipping off relatives who would trade on his behalf. He ended up at MF Global.
There aren't statistics on this kind of thing, but my experiences have all told me succeeding as a hedge fund requires breaking the same rules as everyone else, not unlike doping in pro sports.
Trading on non public information for a gain is going to land you in hot water with the SEC.
These two lines on the SEC site [1] define this.
>Corporate officers, directors, and employees who traded the corporation's securities after learning of significant, confidential corporate developments;
>Friends, business associates, family members, and other "tippees" of such officers, directors, and employees, who traded the securities after receiving such information
1. Bribery, or a monetary reward,
2. Friendship and good relations.
In both cases there must be an unbroken chain of confidentiality compromise. If you legitimately come to know non-public material information about a company and you didn't acquire this information through your own or someone else's confidentiality agreement, you're fine to use it.
Information asymmetry couldn't be functionally and profitably exploited if it was literally illegal full stop. You just have to acquire it without breaking a confidentiality duty to your own company and without aiding and abetting someone else in breaking such a duty (e.g. they tell you and you trade).