Would be hard to discover if he uses his wife or relative's accounts to trade, right?
Even if you had a long-lost friend do it, the big trigger is the purchase itself. Someone buys no options in the past 5 years, suddenly buys a ton of out-of-the-money call options 2 days before a merger. The SEC zeros in on that like a laser.
Then they look at who purchased it. Any connection to the company that acquired/was acquired? No? Do they know anyone who is? Let's get their phone records.
I also think the SEC knows they can't police every transaction, so the ones that are flagged get investigated hard, to make an example of them.
If you really wanted to obscured it, one way would be to have a trail of purchases such that the "big one" doesn't look out of place. However, that would mean you'd need to make a bunch of losing bets.
Especially considering it was probably the biggest data breach news in history, you can bet the SEC went through and looked into every single trader that profited off that.
The regulatory system relies on leveraging financial institutions such as the brokers themselves to do the snitching.
So they may voluntarily freeze funds. But even if they don't there is another layer:
Administrative law judges.
These are employees at the federal agencies that are imbued with the power of the judicial branch and rubber stamp injunctions and "emergency asset freeze" orders from their bosses. And by boss I mean the private sector such as FINRA.
So typically the funds get frozen AND the SEC files charges against non-residents. They can get you in most places on the planet, and also wait till you go on vacation to most places on the planet.
secondly the indictments leverage financial institutions as well as other federal agencies to be notified when a person - even foreign - is in their grasp or has known whereabouts
SEC indictments are often pretty ballsy. I read one where they indicted people in Eastern Europe who only traded on a CFD exchange. CFD exchanges don't exist in the United States. But the SEC said the traders should have known that the CFD broker would have made actual trades in the US equities markets due to their actions so therefore they have to answer for it.
What became of that? Maybe nothing just like you said
Or don't insider trade. In the financial crime universe, insider trading is on the stupid end of the spectrum. It's tough to do right, hard to scale and easy to get caught.
Information asymmetry does not constitute insider trading. Trading on information which you have that the broader public does not have is also not insider trading. Trading on exclusive information which you learned through professional exposure, and which does not come with confidentiality or fiduciary requirements, is not insider trading.
Prior to 2012, Congress was actually explicitly permitted to insider trade. That was fixed by the STOCK Act [1]. It doesn't make it easy to pull up records, but it does close the loophole.
[1] https://www.npr.org/sections/itsallpolitics/2013/04/16/17749...
Courts aren't stupid, and can generally see through collusion attempts, and would probably have a fairly easy time showing culpable intent if you try to trade through friends and/or family members.
Corporate training courses tow the SEC line, but the outcomes of actual civil and criminal prosecutions would be far swifter and harsher if the law was as the SEC says.
In short, in some contexts friends and family absolutely can trade on material non-public information. In fact, in no case are they directly committing a crime; their liability is vicarious--it stems from some illegal behavior of the actual insider, which turns on more elements than the simple act of disclosing material, non-public information. If that illegal insider behavior is lacking then friends and family are no different than some random member of the public who caught an anonymous tip.[1]
Of course, as with anything illegal you have to factor in the risk of a jury wrongly convicting, especially when the legal elements so heavily rely on circumstantial evidence and even insinuation as with insider trading.
[1] If the SEC had their way then even trading on an anonymous tip would be illegal. Indeed, if the SEC had their way they could prosecute damn near anyone they wanted, at any time, because their legal theory is so ridiculously broad it would effectively shift the burden of proof onto the defendant.
Take the fifth?
After any corporate action, the SEC (and various other agencies) trace back through trade records to look for suspicious trades. Family members are a matter of public record. And friends are now announced on LinkedIn, Twitter, Facebook, et cetera.
While the SEC can undertake the tedious process of clearing all individuals with knowledge of the breach, a more effective tactic would be to look at suspicious trades and investigate potential insider knowledge. In that method, SEC looks at unusual volume/patterns in options contracts and security sales. The SEC will comb through each suspicious security sale that occurred prior to the breach announcement and cross reference the account owner's information with their list of insiders. If they have reasonable suspicion that a crime occurred, investigators obtain a warrant and complete the picture with phone records, email accounts, Facebook info (if not already obtained via parallel construction), etc.
So let's say in theory you could add a great deal of people as friends (thousands even) and in that case it would be quite difficult for the FBI to run that down (as they say). Besides they would have to supoena records from Facebook at a certain point if the 'friend' was not someone they could easily determine just from a picture or limited contact info.
And don't even get into 'linkedin' that is filled with more people you don't really know or care about than any service.
Most likely they will just work the other way. Someone makes a trade and they then see if they are linked to anyone in anyway at the company.