Some Amazon employees bought NYC condos before news of HQ2 location emerged | Hacker News Reader

Some Amazon employees bought NYC condos before news of HQ2 location emerged

thehill.com

267 pointsjakelazaroff164 comments

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To understand whether this is even anomalous, you need to know:

- How many Amazon employees already live in NYC or are already planned for relocation there for non-HQ2 things.

- The frequency at which a typical person around there buys new condos

Without knowing those, it's hard to have priors, or to begin to decide whether this is a departure from those priors.

They speak to this right in the article.

> but the Journal reports that one brokerage firm sold nearly 150 units just last week, 15 times its normal volume.

That's the number in the week after the announcement, by my reading.

> Amazon announced last week that it would be splitting its second headquarters between Long Island City in Queens and Arlington County, Va., ending months of jockeying between cities and speculation of where the tech giant would land.

> There are no exact numbers on how many units have gone into contract in the Long Island City area since the announcement, but the Journal reports that one brokerage firm sold nearly 150 units just last week, 15 times its normal volume.

I personally find that claim dubious since I don't think there are 150 units available in all of LIC and it takes a non-trivial amount of time to buy a condo. So for 150 to sell in a week that means there must be 300+ in flight which is basically impossible. Plus for a single firm to do that means there must be, what, 5x as many across other firms which comes out to 1500+. I somehow doubt that 20+% of LIC's total condos are in the process of being sold within a few weeks.

Exactly. Plus, the neighborhood has Thousands of new apartments coming to the market already well before any sort of HQ2 search. Seems like A LOT of people are moving there.

https://ny.curbed.com/maps/long-island-city-development-boom...

Amazon already has like 2000 employees in NYC. The own a building on 34th St. They also announced their intent to lease space in Hudson Yards months ago.

Slow down there Critical Thinker. You can't consider such fundamental questions while creating clickbait.

How is this clickbait? Neither the headline not the article allege any anomaly or misdeeds. It's basic, factual reporting.

It's kind of like yelling "Fire!" in a building, only to say "surely there's a fire somewhere in the city".

Or like yelling “Fire! Run!” because there is a fire in the fireplace.

How is it not? There is definitely an implication...they even discuss the legality of it. Amazon employees have purchased hundreds of thousands of pieces of real estate over the years, how many articles were published discussing individual transactions?

"Apple Employees buy a home in SJC before iPhone launch" "Goldman Sachs Employee buys home in TriBeCa during bonus season" is not something you read regularly.

https://www.nytimes.com/2004/12/28/business/that-line-at-the...

I think "Line at the Ferrari dealer" is pure clickbait.

Additionally, this is talking about a macro trend across an industry, while the current article is talking about 2 employees out of hundreds of thousands.

The article from 15 years ago is also not discussing the legality.

So your case is they are stating the obvious? And that now qualifies as news worthy of publication? And they're publishing it not as a (meaningless) public service but because they know ppl will click to read it.

I trust you can do the math from here.

"While employees of companies are barred from buying or selling stocks based on information that has not yet been made public, lawyers told the Journal that they were unaware of any such ban affecting real estate transactions."

This is exactly what I was wondering, I know there are rules against insider trading, but I wasn't sure if there were rules against people buying property based on a potential location for a new HQ.

There aren't. Matt Levine had an article about it recently, oddly enough on HQ2

The crime of "insider trading" is a type of securities fraud. A plain reading of the law would not seem to apply to purchasing a home. But historically securities fraud has been used to prosecute a wide array of behavior

I would be surprised if purchasing a mine for some particular mineral immediately after learning that your tech company will suddenly need an enormous amount of that mineral in a closed door meeting, didn't constitute some sort of insider trading.

Similarly, if advanced real estate purposes were made with the intent of resale I'd imagine you'd also get hit with insider trading. I think it'd be pretty reasonable to prosecute them anyways since they are using insider knowledge of market movements to gain an edge in the real estate market.

That’s a very broad and speculative reading. Insider trading is about regulating the securities market, not about keeping all transactions by the insider information-balanced.

Or as Matt Levine says - it is about theft (ie trading on stolen information) not about fairness

> I would be surprised if purchasing a mine for some particular mineral immediately after learning that your tech company will suddenly need an enormous amount of that mineral in a closed door meeting, didn't constitute some sort of insider trading.

Then prepare to be surprised

> Similarly, if advanced real estate purposes were made with the intent of resale I'd imagine you'd also get hit with insider trading

You'd imagine wrong

> I think it'd be pretty reasonable to prosecute them anyways since they are using insider knowledge of market movements to gain an edge in the real estate market.

That's not what insider trading is in the eyes of the law.

Insider trading applies strictly to securities. Commodities markets have laws against front-running. But that's about it.

If you take information that your company is going to suddenly need a new metal and you go buy all the mines then about all your company can do is fire you.

They may be able to sue you depending on your employment contract.

For a historical example I’m pretty sure Disney did this with purchasing land in Orlando before they announced they would build Disney World there. They even used fake names. Given in that case the company itself was doing the purchasing in secret so that seems a bit less shady.

Real estate as a whole needs newer and much stronger restrictions. It's an inarguable fact that it's a "housing market" and speculative investment tends to be bad for everyone.

"I would be surprised if purchasing a mine for some particular mineral immediately after learning that your tech company will suddenly need an enormous amount of that mineral in a closed door meeting, didn't constitute some sort of insider trading."

I do mining. It's not illegal by any means. How else would a company obtain the resources they need if not for looking for them, either in the earth or in the marketplace?

Hey lightedman, just wanted to make sure you know you are shadowbanned and have been for years. I can see your comments because I have "showdead" turned on but most people can't.

Do you have any examples of such cases? I'd love to read the law on this.

Matt Levine has some entertaining articles on insider trading allegations

There was a great article from yesterday on securities fraud: https://news.ycombinator.com/item?id=18498796

I was looking for specific case law that could be used to argue that the behavior in question is unlawful, as the GP implied but did not support with facts or law.

The article you cite does not provide references to such law either; in fact, it neither has the word "fraud" nor "insider" in it. This article was about bribery, particularly of foreign officials; and the prosecutions attempted by the SEC led to consent decrees, not new securities laws. (The FCPA, however, eventually did get passed by Congress to outlaw the practice; but that is not a securities law.)

In fact, the article itself states:

> Proxmire believed that although the SEC had done all it could under the disclosure program, what was really needed was a law specifically prohibiting foreign bribery. The existing laws were not sufficient, as they addressed only the means through which a bribe might be paid, but not the act of paying a bribe itself.

So it's unfortunately not very helpful.

In the early days of the USA, "land speculation was scandal bordering on crime and sometimes considered treason (since the USA borders were expanding, so getting involved in not-yet-USA land was competiting with government plans).

Amazon’s employment NDA surely prohibits employees from using company confidential information outside work, for example as a side business doing real estate investing

You are expected to USE confidential info. I don't think this counts as DISCLOSING confidential info.

Personal use is disallowed. From Amazon employee NDA[1], section 3.1:

"Employee will hold all Confidential Information in strictest confidence and will not acquire, USE, publish, disclose, or communicate any Confidential Information except as required in connection with Employee’s work"

Capitalization of USE mine otherwise verbatim.

[1] https://cdn1.vox-cdn.com/uploads/chorus_asset/file/3543196/A...

If you know you're going to be going to NYC, how is this not "in connection with Employee's work"?

If the location of HQ2 hasn’t even been announced internally at Amazon, I don’t think any employee would know for sure they are relocating there.

Even if you were on the team who decided that on NYC and were charged to make it happen? I don't find it unreasonable to think that some key members of the team were set to relocate in and around the time the announcement came to pass. There is not enough information here to say if this is for speculation in real estate or personal use.

Heck at the rate of turnover and the job market they just could be a few employees leaving Amazon for a new position in NYC.

Maybe, but at the same time I would assume Amazon offers relief assistance? I needed my companies sign off before I could even start looking for a house.

My company requires employees to sign a document that they won’t use confidential company info for personal gain.

If we go down that rabbit hole, are you allowed to perform well in your job using confidential information in order to gain a promotion?

The actual language specifies personal gain outside of work.

That said, I don’t think they have any mechanism to enforce it.

"We're going to ask you to move to New York, but don't use that to personally gain housing"?

The question is whether they bought that housing for themselves because they're being moved or if they bought it to resell at a profit because they had internal knowledge of this neighbourhood being used for HQ2.

The locations really weren't generally known internally. A few days before the announcement, there was a company-wide all-hands meeting with Jeff where we presumed we'd find out. Nada. Nothin'. No details. We were all left in the dark as much as anyone else.

So the real question here is "which employees, and what did they know?". Or even better, will they be living in these condos for a few years, or selling them in 3 months?

Isn't in US some heavy taxation on capital gains from quick property sales to prevent this type of speculation? Ie in France it's progressively lowering after 5-6 years, it gets down to reasonable levels in I think 22 years.

The result is much less volatility on the market.

There is a long-term capital gains tax break for holding a certain number of years. However with real estate you can sell one property and use the money to buy another within a certain amount of time and not have a taxable event. (See https://www.irs.gov/businesses/small-businesses-self-employe... )

I’ll say it again: it’s absolutely irrational that we encourage flipping through our tax system. Short-term capital gains on housing should be taxed at 100%.

Really tired of the HN thought-police censoring ideas by downvote. If you disagree, reply and make an argument.

Note that the ability to roll over gains only applies to investment properties. You can’t use this in conjunction with the $250k/500k exclusion for the sale of a primary residence.

So it’s worse than having a policy that is neutral on flipping: our tax system actually encourages it.

We shoud tax short term capital gains on property at 100 percent. Nobody should be able to profit by driving up the cost of housing.

flipping houses isn't driving up the cost of housing. The costs go up for other reasons. Flipping is simply trading, aka providing liquidity in exchange for taking volatility risk.

> flipping houses isn't driving up the cost of housing.

Yes it is.

> Flipping is simply trading,

Usually, not: flipping is typically short-timeline buy-improve-sell cycles (that is, it's exploiting market irrationality where certain improvements add more to market clearing price than they cost to add.)

This does bring up prices.

Since there aren't many easy ways of shorting housing (besides rather exotic securities), speculative activity usually distorts prices upwards more so than it does down.

I'm surprised to see you downvoted so heavily; I thought HN was generally familiar with Georgism (which I'm pretty much a full-throated supporter of), and what you're suggesting is a softer version of Georgism (limited to short term gains).

The principle behind capitalism is that you create value and get a portion of the value thereby created as income/return. Land value appreciation very much doesn't fall into this category, unlike every other investment in which 1) the capital serves an allocative purpose and 2) is being put into productive use by someone else. Land value gains are generally extractive (and destructive, through the inefficiency it introduces) of the wealth created by nearby economic activity. I know someone who bought a bought a house in Beverly Hills in the 70s for $30k: forty years and a ~million dollars of value growth later, they sold it and collected four decades of extraction from the economic activity of the area around them. There's no universe in which this is sensible policy, and as you rightly point out, encouraging it through tax policy is even more insane.

I think it's something about homeownership that makes people hyper-defensive about this topic and unable to think clearly. I can't say I relate, given that my dad's career (and an outsize portion of his portfolio) in real estate doesn't prevent me from seeing the issue clearly.

Nobody drove the price up. It was simple supply and demand. If more people want to live in a area -- for whatever reasion -- the amount somebody will play will go up.

Why should somebody not be able to take advantage of that? What if they simply wanted to move two streets over? But now could not because the somebody thinks it's unfair that housing prices whent up.

But your other points are messy. People in the cominity are building that value over time by being good citizens of the region. Had they been bad citizens nobody would have moved in and continued the process of building the cominity. It also cost a ton of money to keep your house in proper working order with also increases the demand and again raising the value of the proeprty.

I have so much more to say but I am replying on a phone and I can't stand it. Phones are horrible.

There is no universe where somebody could buy a house for 30k and forty years later be told even though they sold it for millions that they gave to give it all back - and then try to find another house for 30k. God I hope I read your post wrong.

The only claim I made about "driving the price up" was that local economic growth drove the value up. Ie, the productive value of the land increased because the local economy grew (this includes living, since everyone but remote workers have dependencies between home and work locations).

This isn't incompatible with supply and demand at all, and from your comment, you don't appear to have understood my comment at all.

“Supply and demand” has two sides. You can ameliorate demand distortions while also building. They’re not mutually exclusive.

If someone wants to or needs to own for a short term, a sensible policy is to ensure that they don’t profit from their whims.

When it comes to housing, HN is filled woth rigid ideologues who will tolerate no opinion that doesn’t exactly agree with that of the hive-mind (i.e. if prices are high, the only solution is to build more; demand distortions do not exist.)

Everything else is censored by downvoting.

Short term capital gains are taxed at the same rate as ordinary income. Long term capital gains (greater than 1 year) get taxed at a lower rate.

For homes, you need to have lived in the house as your primary residence for 2 of the past 5 years in order to qualify for long-term capital gains.

This is not true at all.

You need to live there for 2 of the past 5 years to claim your $500k capital gains exclusion.

Otherwise the normal short-term/long-term capital gains rules apply.

https://www.thebalance.com/sale-of-your-home-3193496

In the US you may exclude up to half a million dollars of gains from your taxable income if you owned and lived in a property for at least two years. Otherwise gains on the sale of real property are taxed as ordinary income.

Specifically, 250K for single filers, 500K for married couples. Also, if you're married by Dec 31st, the IRS counts that the same as being married all year in terms of filing status eligibility, so it may pay off to get hitched before you sell and divorce after ;-)

If you hold it for longer than a year, long-term capital gains rates apply, which are generally lower than ordinary income rates.

That's harsh in the UK your primary residence is exempt totally.

It's not harsh, it's acknowledging that windfall income is unearned. That half a million exemption (or half that for unmarried people) is in addition to deductions for all depreciation and expenses.

Does it matter.

Yes. If they sell them in three months they're using insider information for financial gain. If they live there they could have just been making an early start on finding somewhere convenient to live. Whatever the rules are there's definitely a moral difference.

I am no lawyer. But I think insider information is only with respects to stocks.

Also. I find no moral issue with this at all. Nor do I think it is somehow unfair.

Even so Jeff him self could and I think did pick a place located near some of his houses.

We really need to stop getting outraged when somebody else gets ahead. This is just pure jealousy and is very toxic.

Pissing I somebody else's limonaid is not going to make yours taste any sweeter.

> But I think insider information is only with respects to stocks.

Technically it's "securities," which is a broader array of financial instruments than stocks. But I'm not sure that real estate, particularly real estate that one might use as a primary residence, is considered a qualifying security with respect to SEC insider trading laws.

Real estate is not a security, unless you buy a derivative of it (like equity in a REIT)

lol real estate itself is not a security

I have multiple objections to this statement..

1) Trading on "inside knowledge" is not really a crime, or even a problem. Everyone knows something the other doesn't: thats why you trade on it. You sell your knowledge and knowhow.

2) Why do you think the employees of amazon are less entitled to that gain that the landlords or queens that have almost no relationship whatsoever to the company and have somehow a windfall

3) The ultimate loser of not being able to capture the externality value produced is the company, i.e. the shareholders. This is the other side of the coin of when amazon bargains for tax breaks: some people will be made wealthier for a tangential participation.

why do you care? Its not a security. They are not robbing anyone. Who cares?

Are you jealous?

> Or even better, will they be living in these condos for a few years, or selling them in 3 months?

They could rent it out. If LIC is expecting an influx of highly paid workers, rents are bound to increase significantly over the next few years and if things work out, the condo prices will increase even more. Why not hold onto it for a few years collecting rent and then cash out with a nice long term capital gains tax treatment on possibly significant capital gains?

It's a tossup though. LIC's (relatively recent) zoning means the HQ2 announcement might lead to a wave of new construction in the area, which could cause rents to drop.

It says 2 employees bought a condo....in a neighborhood with probably the most amount of construction in NYC. How is this scandalous? People do buy real estate on their own...

I looked it up and it appears Amazon's current office in NYC is in Midtown -- meaning 2 employees of several thousand -- bought a condo in a neighborhood just a couple of subway stops away. Probably because they couldn't afford to live in Manhattan!

ARREST THEM! People shouldn't' be spending their paychecks on a home with a decent commute to work.

This is scandalous! I am certain we can find a few people in every major company that would attest that this should be illegal.

I'm usually an amazon hater (with a shiny amazon prime subscription...) but I agree with you, this is a stretch even by amazon hater standards.

It was probably originally only one but in order to say employees (plural) they stretched a bit. It was, after all, only a one-person lie. No big deal. But a much different headline / title.

Right. The only thing that's scandalous here is that the author didn't think of the most likely explanation. smh

Hopefully they display journalistic integrity and update the story.

Matt Levine talks about what is considered insider trading and what isn't. (scroll through each to the relevant headline)

https://www.bloomberg.com/opinion/articles/2018-10-22/front-...

https://www.bloomberg.com/opinion/articles/2018-11-20/u-s-sa...

https://www.bloomberg.com/opinion/articles/2018-11-21/now-yo...

Most important tidbit in there is actually nothing to do with Amazon HQ2 but rather his recapitulation of a subtlety of insider trading which most people do not realize or necessarily share his perspective on:

>Insider trading, I often say, is not about fairness; it’s about theft. There is no general prohibition on the use of material nonpublic information in stock trading, and in fact investors are supposed to find out new facts, and trade on them, so that prices can be more informative. Insider trading law is really about the misappropriation of nonpublic information that belongs to someone else — a corporate CEO using information that belongs to shareholders, or a therapist using information that belongs to her client — rather than the “level playing field” that prosecutors love to talk about.

I think Matt Levine is rather excellent, a model for the sort of dialectic reasoning that's sorely missing.

Yet I just don't get this argument of his. As far as I can tell, insider trading prohibitions are intended to protect the integrity of the market. That's why they are administered by the SEC. If you steal office supply, the SEC doesn't get involved. If you steal trade secrets to build an exact replica of <widget>, the SEC also has nothing to do with it.

"Integrity of the market" in this case means that every investor can at least somewhat accurately estimate where they stand in the competition with other investors. That doesn't mean it's a completely level playing field; Large funds with the resources to send employees to every walmart and count the cars in the parking lot will always have an advantage. And that's not a bug but a feature, since it's the mechanism by which investors are rewarded for uncovering information.

But those are what one might call "known unknowns". What could easily destroy the market are "unknown unknowns, the Deus Ex Machina taking all your money, with not even the theoretical chance to compete without leveraging insider information yourself.

As an analogy, it's like a usual casino, where you know your expected value is slightly negative. And one where, with no predictability, the staff sometimes just takes all your chips and kicks you out.

All that appears to me rather close to the concept of "fairness". Not for any moral considerations, but simply to avoid the inevitable death of an "unfair" market.

(There's a fair (stolen?) chance that Matt Levine is right and I'm wrong. If you are looking for investment or legal advice, he is far more capable than me.)

(I also think this very case somewhat supports the view above: Surely buying real estate ahead of the market is an opportunity that Amazon itself could have used profitably. Thus, it would appear to fit the definition of "theft of information that belongs to the company")

What I'm curious about is whether LIC condo prices are really going to increase dramatically compared to similar projects in other parts of NYC? LIC is a major subway stop and well connected to the rest of NYC as is...you can live in Manhattan and get to LIC in 1-9 stops in < 30m. You could even live in Jersey City and get to LIC in 50m. It takes longer for some people living in outer neighborhoods of SF to get downtown than that!

Long Island prices are probably not going to be noticably affected. 25,000 people moving into NYC is a small blip. Perhaps Long Island City [1] prices will go up a tiny amount due to people who want to walk into work.

To keep things in perspective, there are >8 million people in NYC and >20 million in the surrounding areas. Amazon is planning to employ 25,000, which is tiny in the scheme of things, especially considering that it's going to take a decade to be fully up and running. On top of that, I'm sure that many, if not most, of these employees are going to come from NYC's existing workforce.

I used to work in Long Island City and I commuted from Manhattan's Upper West Side, which took about 30 minutes. Commutes are even shorter from must of lower Manhattan and Brooklyn, not to mention most of Queens. I just can't imagine that this is going to have a noticeable effect on NYC or Long Island pricing overall.

[1] to those not familiar with New York, Long Island City, despite the name, is a neighborhood, not a municipality, located in Queens. While technically Brooklyn and Queens are located physically on Long Island, typically when people say "Long Island" they are referring to those parts of the island beyond New York City borders.

This is a good point. As a former LIC resident, I lived there because of the transit situation to other areas of the city. If I was working in LIC rather than Manhattan, I could easily live somewhere like Flushing or Greenpoint instead.

Apartment prices have been dropping in LIC for a few years because of all the new development. I can't imagine Amazon's announcement will slow the development pace, so I wouldn't be surprised if LIC rents do not rise at all.

Over the past few years, LIC has grown a ton - to the extent that it is depressing rents in neighboring areas like Astoria. As you mentioned, I'd imagine a lot of Amazon employees are going to want to live in different parts of the city as well. Considering both of those factors, I'm not concerned.

Doesn't sound too bad these 30 to 50 minutes. I currently have give or take 90 minutes one way depending if you take breakfast from my favorite coffee shop in the morning into account or not. And if the trains are running on time that's quite acceptable time.

Today it will be more like 2.5 to 3 hours to get home... Thank god for work from home tomorrow!

I actually feel like what'll get much more expensive is Nassau county. LIC is right off the LIRR, and commuting from LI -> LIC is very doable.

LIC is already basically full of luxury high-rises, so it's unclear to me that it'll get significantly more expensive.

Of course, what the hell do I know about real estate.

Probably more likely that nearby land that's within a decent bus ride of LIC will increase in value and higher density housing will be built there. The land that was right next to the existing subway stop was obviously already quite valuable.

> What I'm curious about is whether LIC condo prices are really going to increase dramatically compared to similar projects in other parts of NYC?

It depends on whether NYC/NY will invest in it. People have talked about LIC being the next great thing for decades. I guess sooner or later, it will be LIC's turn. But I don't think AMZN is it.

> you can live in Manhattan and get to LIC in 1-9 stops in < 30m.

Nobody who lives in manhattan wants to work in LIC though. That's the problem. Manhattan is the work hub of the satellite regions like brooklyn, queens, hoboken, etc. These regions aren't work hubs for manhattan.

> You could even live in Jersey City and get to LIC in 50m.

Depends on the part of jersey city you live in. Most people aren't willing to switch trains to get to work. PATH to Metro twice a day? No thank you. If traffic warrants it, you could probably take the ferry directly from downtown JC to LIC.

JC resident who commutes to Manhattan here:

> Most people aren't willing to switch trains to get to work.

Not true in NYC. Plenty of people change subways once or even twice to commute. Changing PATH to subway is no different except you have to pay twice.

> you could probably take the ferry directly from downtown JC to LIC.

Currently there are no ferries that run this route directly. NY Waterway runs the Hudson River ferries, which the MTA (subcontracted out) runs the East River ferries. You could do this commute by ferry if you changed ferries at Wall St/Pier 11, but that point you might as well take the train.

> which the MTA (subcontracted out) runs the East River ferries.

I was under the impression that the MTA is not involved at all in the NYC Ferry system - it is run by Hornblower, a German cruise company.

[Edit: I am correct. Per https://www.ferry.nyc/about/faq/ "The MTA is a state agency, while NYC Ferry is an NYCEDC project."]

Stuff like this seems like standard practice in the real estate industry (I am not an expert)

For instance, I know one strategy called "land entitlement"[1]:

Step 1) Find an area that has demand for a type of building or business that it is not zoned for.

Step 2) Buy an option on a plot of land in that area.

Step 3) Lobby the government to rezone that area / approve your project

Step 4) Execute option and acquire land and a fraction of its new valuation

This isn't directly analogous to the what happened in this instance, but essentially this is just a way for people with influence in local government to make money. Imagine if someone with connections to the FDA bought an option on a biotech stock and then convinced his friend, the commissioner, to help get their drug through the approval process. I'm pretty sure that would be illegal (or at least a gray area) -- but it's fair game in real estate.

[1] https://cashflowconnections.com/land-entitlement-with-chris-...

This is different because it involves risk. You might lobby the government and they might reject your proposal. That doesn't make this illegal though - but there is a difference.

I wonder if that would be considered graft? "reverse" graft?

i would not know where to begin with land options - is there a primer. it sounds like a thing designed for people with corrupt control over local councils

The way I've heard this working is: you approach the landowner with a really good bid for his land ($5m for his property worth $4m). He agrees to sell, but you have trouble coming up with the money, and ask him if he can keep the offer open for a year or so. He isn't thrilled with this, but you offer him $250k up front, to be forfeited if you don't come up with the rest of the money. This makes the $250k look more like a token of good faith and less like an undervalued option, but it comes to the same thing.

You can write or buy an option on anything — it’s just a legal contract.

Generally curious: Is there such a thing as "insider trading" for real estate purchases?

For example, what if Bezos were to buy a ton of real estate in the DC area anticipating the value would go up after he announces Amazon will locate there, and he could effectively position himself as a "slumlord" of sorts for the surrounding real estate market?

Matt Levine [1] is a lawyer and he wrote [2] once that he doesn't think it's a violation of insider trading laws to transact in real estate with insider knowledge:

The insider trading laws apply only to securities markets — even insider trading in commodities markets is mostly okay 2 — and that probably is because of some background expectation of a level playing field in those markets. Nobody expects real estate to be fair; it is not exchange-traded and liquid and fungible; it is just obviously a market where some people know things that others don’t. Insider trading in operation is about theft, not about fairness, but the reason that the law concerns itself with the theft of one particular kind of information — or, rather, with one particular misuse of other people’s information — probably is about fairness.

[1] https://www.bloomberg.com/opinion/authors/ARbTQlRLRjE/matthe...

[2] https://www.bloomberg.com/opinion/articles/2018-10-22/front-...

Edit: I stand corrected, Matt Levine is a lawyer.

Matt Levine is actually a lawyer.

Do I have some news for you.

https://www.washingtonpost.com/news/reliable-source/wp/2017/...

I think it's more likely he simply chose to put HQ2 near his house rather than his house near where he planned to put HQ2.

Why? Likely he made both decisions together, since that's the obvious behavior.

No. Insider trading (in the U.S.) is a specific crime based on federal securities law.

Matt Levine covered this very exact situation vis-a-vis Amazon https://www.bloomberg.com/opinion/articles/2018-10-22/front-...

Not a lawyer but I understand that insider dealing is defined and covered by securities laws and regulations. For instance I believe there is no such thing as insider dealing in the foreign exchange market.

>that insider dealing is defined and covered by securities laws and regulations

Correct. Now, if these employees had purchased mortgage backed securities, then it would be a different story.

Don’t they also have to be an insider? If an officer of company A buys securities from company B based on inside knowledge of company A, does that even count as insider trading?

Yes, since SEC v Materia (https://openjurist.org/745/f2d/197/securities-and-exchange-c...).

Not "insider trading," no.

I do wonder if the seller of the condo might have recourse (under the outer edges of deceptive trade practices laws), or if Amazon itself would have recourse (by some kind of corporate opportunity doctrine).

And if Amazon does, can shareholders act for it, or force Amazon to act?

>While employees of companies are barred from buying or selling stocks based on information that has not yet been made public, lawyers told the Journal that they were unaware of any such ban affecting real estate transactions.

It's the third sentence in the seven sentence OP.

Insider trading is wrong based on the theory that the insider -- the owner of some shares -- has a fiduciary duty to the company.

That's why there are no equivalents in commodities or real estate.

However, if Bezos were to buy a "ton" of real estate in the immediate area and then intervene in the process solely to enrich himself, the share holders of Amazon may feel they have used their money to enrich himself.

(I am not suggesting anything of the sort actually happened in this case.)

I don't see anything about the timeline of these purchases, which seems like a critical detail to me. Most NYC purchases are 1 month+ affairs, and it's not unusual for it to stretch to 3 months or even longer. I'd like to know the date they initiated a property search, went on-contract, and closed the sale.

If you wanted to be sure of closing before the official announcement, you'd have to start your search more like 6 months ahead of time. I doubt even Amazon itself was sure of the location that far in advance. Maybe they had already decided to move there with no knowledge of the HQ2 location at all?

Or have they even closed on these properties? It's more plausible that they could learn the information, start a search, and get a purchase contract signed in a week or two if they were in a rush and not too picky. Then they would be fairly well guaranteed to be able to complete the purchase at a pre-announcement price. Assuming that the announcement does infact affect the price - this isn't that huge of a corporate move for the NYC market. But that also means that the purchases could fall through if there are legal questions about it.

My personal observation why Amazon was always going to move to LIC (New York City) and it has been decided if not years then months earlier: I live in NYC. I have a very good friend who moved to LIC in March this year. You have to understand that there is already abundance of construction going on in LIC for past few years, but not at an aggressive rate. But within a radius of three block where she lives (near FoodCellar market and Hayden something condos) construction peaked. I can count there are 7-8 aggressive construction going on this area alone. My understanding is clearly city leaked/shared this information with builders months in advance so that they can get a head start on these new condos. This area I am referring to is near One Court Sq (one of the buildings shortlisted for potential Amazon HQ).

https://commercialobserver.com/2018/11/amazon-finalizes-plan...

https://www.google.com/maps/place/Citibank/@40.7472946,-73.9...

Who cares? There's no shortage of condos for sale! In case anyone is deeply concerned about the moral implications (because there are 0 legal implications), there's actually a luxury condo glut in NYC right now. https://therealdeal.com/2018/08/19/condo-glut-is-to-blame-fo...

> The employees decided to buy units in a new 11-story condo building in the Long Island City neighborhood of Queens just before the first reports of Amazon’s HQ2 location were released this month...

On the surface, these condo purchases seem suspicious. OTOH, there are thousands and thousands of Amazon employees, so, one might ask: how many condos in NYC do Amazon employees typically purchase per month? Is that number zero?

> On the surface, these condo purchases seem suspicious.

Buying real estate ahead of such an announcement doesn't break any laws (edit: it might have violated employee agreements if Amazon has anything in there about acting on insider info, not an Amazon employee so I cannot comment on that). It's not as if this was a short dated deep out of the money call options play based on insider information (most definitely against the law; don't do this!).

yes. ok. "suspicious" is probably a bad choice of words. maybe just "curious" or "intriguing" would have been better.

if the underlying implication ever actually proves true, then i have to wonder how these 2 employees even got that info ahead of time. i would have thought only Bezos and few top execs would have known this info before the announcement.

Maybe not legally, but morally it's certainly equivalent to insider trading.

I don't even think it's a moral issue. If anything, these Amazon employees purchased before speculators could front run them. Working for Amazon is hard enough without generating fake outrage.

Your concern should be with any elected official who offered Amazon concessions to locate in NYC. When their reelection comes up, it should be expressed that New Yorker's subsidized a trillion dollar company.

    > Your concern should be with any elected official who offered Amazon concessions to locate in NYC.

Yes! In fact, all (or at least most) of the cities who "bidded" for the Amazon HQ2('s), did so by keeping the bid secret from their taxpayers. THAT is sketchy and vastly more harmful than a couple Amazon exec's getting a little greedy with condo real-estate.

Believe me, that is a concern of mine as well :)

Who is the victim here?

The victim is a mix. The previous owners, the people would have bought there if the Amazon's employees did not, and the people who now are going to buy in that neighborhood in the future.

Most people who don't make 10s of 1000s on property purchases just because they have inside information and have to work for a living?

The previous owner of the condo?

How does that make them a victim? They weren't forced to sell at any price. That's real estate and the article says they are net new construction.

Also, Amazon has thousands of employees in NYC already. LIC is close to Midtown Manhattan, a few subway stops away and is a neighborhood full of new construction.

It makes sense for any employees to buy there regardless of any situation...doesn't?

Since when is "Buying a nice apartment in a desirable neighborhood near work" a suspicious or criminal thing? Geez.

"How is the buyer of a stock shorted based on insider information a victim? They weren't forced to buy at any price."

By this logic, would it not be immoral to engage in any trades when there exist information asymmetry? There will always be "victims" who do not make a profit because they made a bad investment.

A person losing money due to insider trading has almost certainly invested in a company that was not worth what they thought it was. If they’re a victim, then whose victim are they really? I have a hard time blaming the insider trader.

You buy stock to sell it later and make money. Most people do that. You buy and apartament to live in. Most people do that. Ffs

They in fact got a better price then would have happened absent the shorting.

> morally it's certainly equivalent to insider trading

So it's the right thing to do? Insider trading helps everyone by adding more information to the markets.

No it doesn't. The information necessarily comes out anyway, otherwise there would be no advantage to insider trading.

There's nothing "morally" wrong with insider trading. The purpose of insider trading regulations is to limit the spread of information about the firm. Executives who keep pertinent information from the investing public are conspiracies against their own employers. Defection from such a conspiracy may be disloyalty to the management chain, but it is loyalty to the shareholders.

I'm sure the SEC will find some way to call this insider trading, if they want. The mortgages are destined to be securitized!

No, I don't think so.

I understand why people are upset over Amazon's behavior with the new headquarters, but this article is scraping the bottom of the barrel for new headlines to stoke outrage over. There is literally nothing wrong with acting on insider information in a context outside of securities trading, which real estate is not.

wrong != illegal. You statement should read "There is literally nothing illegal with acting on insider information in a context outside of securities trading, which real estate is not." Given how contentious housing is these days due to high prices, I'd argue that many would find buying real estate using insider information to be wrong.

It's not necessarily suspicious at all. They almost certainly are not going to staff the new offices entirely with new hires. Many people will be transferred in from other offices.

That will include many to do the large amount of the work that needs to be done in New York before the new offices actually open.

It is quite likely that these condo buyers are such people, moving to New York to work on opening the new offices and then to work at those offices.

If it is only a small number of employees, there is no reason for them not to find housing in New York as soon as they can after finding out they are transferring.

I’d also be curious as to how many condos were bought in the cities that did not “win”. I’d imagine it would be very hard to get that data though...

Long Island City is also an obvious choice for current residents along the L train who might be moving because of the upcoming L train closure. It's worth noting that LIC is only a ~20 minute commute with two train options (M & 7) to the current Amazon office, which is better even than the commute from parts of Manhattan. So I wonder if this is just part of a greater migration pattern from along the L to LIC/Astoria?

And if they bought the condos with insider knowledge of the future location of Amazon HQ2, why would that be of any concern ? Why would it be fraudulent ?

The laws exist to stop corruption where people "in the know" get to make loads of money from privileged information - the rich get richer etc. This example of housing is a similar issue but, of course, the question is whether it is illegal, which it seems is unlikely.

Amazon already has offices and staff in New York, so it's perfectly possible the purchases were innocent. Whether they are or not is another matter.

Just the notion that there could even be a ban about buying real estate based on insider information is insanity. Not every advantage needs to be legislated away. Same logic as CEOs hiding who they are when buying real estate sometimes; there's no moral obligation to inform the seller so they can drive up the price to make more money when they'd sell for their current one.

Maybe irrelevant but still interesting:

more than 100 condos and over 100 mistresses, and literally tons of cash at home, a Chinese state company chief.

https://www.caixinglobal.com/2018-10-17/fallen-chief-of-bad-...

The President of the United States has specifically stated that he favors doing trade deals with the leaders of nations who buy his real estate properties.

If I had to measure, using myself for scale, how little of a shit I give about two nerds at an internet company buying condos where they may be working next, it would be at about bacterium-level.

What's the relevance with the President here? Is it in contrast with how little this is important to the president or you think the president profiting of his public office normalizes this type of behavior, which I don't see the link to very clearly?

We should be seeing news articles about political cronyism, corruption and favoritism, more than we see articles about two people at Amazon buying condos. Maybe if they were buying the condos from a politician in exchange for favoritism would it be news-worthy

Are you suggesting there isn't already a bunch of articles about the very example you gave?

I’m not sure that this is unfair at the individual level. If I’m an employee moving there I probably want to buy at the current price (which is still pretty hot) before speculators come in and bid it up and I can no longer accord to live there. Now if it was to buy and flip, I’d feel that this wouldn’t be right.

Wasn't the main scandal here the idea that local government was effectively paying money to one of the richest companies in the world? I wonder how many people lobbied their representatives to say that they didn't want their money spent on enticing a rich business into the area even if it might bring jobs.

Sooo 2 employees, out of the tens of thousands that Amazon employs, bought a condo? Why is this news?

What's scandalous about this is that there a journalists out there who would make a story out of this. Amazon has so many employees that "Some Amazon employees bought condos is location X in week Y" is probably a true statement for all X and all Y.

I think this only matters to Amazon internally -- if some employees had advance notice of the move and bought property before the rest of the company was informed, that's not fair to other employees.

How? Maybe they are the employees that have to move to oversee construction or whatever other reason Amazon needs them there so they had advanced information. In any case Amazon is under no obligation to inform everyone about something like this.

The profit from before this hit and after for a single condo could increase in value at least 100K easily. I still don't think that's an SEC worthy thing.

Because it's "only" 100K or because private real estate transactions are not in the SEC's jurisdiction? The SEC definitely gets involved for less than 100K.

Amazon already has offices in NYC. Is it really that perfidious that employees would buy in a new condo building close to the existing office?

So? It's not illegal so what is the story here ?

even if this was based on insider info, there are no laws preventing this..

Insider property buying

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