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Comment by Topgamer7 | Hacker News Reader

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?

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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!

Very interesting observation. Large number of short term OTM options are flagged when they become in-money.

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/

That's quite different from an actual insider, not just a random with a tip.

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.

People do really dumb things for relatively small amounts of money. Look up examples of corruption in US city administrators.

You’ll see people who throw away their career over $30k.

What you don’t see are all the other shady things they did. How often do people get caught the first time?

Martha Stewart was jailed for avoiding a loss of ~$45k USD.

With a net worth of over $300 million.

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.

I think she was jailed for obstruction of justice / lying to investigators. She had to pay civil penalties for the actual loss avoided.

True, but she wouldn't have had to lie to investigators if she hadn't tried to dodge the loss.

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.

Now, could they flag it for the FBI? Sure.

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.

Good example.

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.

I think Martha Stewart was a classic example of "do not talk to the police" but maybe I was wrong...

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?

The SEC does charge those kind too

They're pretty ambitious

They do it “pour encourager les autres”.

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”.

She was jailed for that in a deal and was charged with much more.

The people running the Las Vegas convention center threw away their careers for $90,000 in airline gift cards.†

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...

> 1.4M in profits? Doesn't that seem like chump change?

$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.

This is just a show, to make it clear they won't abide insider trading, from people who are only making 6 figures from it.

Perhaps they had finite capital to start with.

Depends on what they initially put in. Lets say you made 1.4mil of 100k investment. That would be pretty good.

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.

It's a family thing. They aren't splitting it in any direction. It's kept in the family.

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.

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