SEC charges former Amazon finance manager and family with insider trading
sec.gov
sec.gov
How does the SEC know this? Is it most likely browser history? Google account history? Corporate monitoring software?
> 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?
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.
Thanks for the attempt at explanation at least haha. (Though to me, this sounds like a monopoly-money game, really odd concept).
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.
When you are short options you can take down the whole financial system with you.
A 2.87% change in the stock can move option values quite a bit. Example:
https://www.barchart.com/stocks/quotes/AMZN/volatility-greek...
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
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...
You’ll see people who throw away their career over $30k.
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
2) There's a thrill of playing the stock market that's just like the thrill of playing the lottery or poker.
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.
> In a parallel action, the U.S. Attorney's Office for the Western District of Washington today filed criminal charges against Viky Bohra.
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.
[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.
> 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.
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.”
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.
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?
Moderately liquid
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.
It wasn't insider trading, but it was financial fraud by a ceo.
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?
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.
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.
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.