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Comment by lizdax | Hacker News Reader

>he obtained from his wife, an Amazon finance employee, to place trades in Amazon stock–making a profit of $1,428,264

>Bohra engaged in illegal insider trading in advance of 11 straight earnings announcements.”

>He and his family members have paid $2,652,899 in disgorgement, interest and penalties.

And 26 months in prison! This is why if you're going to do any kind of trading yourself -- never touch the company you work for.

Some more info on the original SEC filing as well: https://www.sec.gov/litigation/complaints/2020/comp24923.pdf

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He blatantly traded those 11 times during blackout periods. Companies make it very clear what these blackout periods are, so this was very stupid, as he was bound to get caught.

There's nothing illegal about trading your employer's stock if you don't have access to insider information. Millions of investors do that with no problems.

Something being technically legal under some conditions doesn't automatically make it sound financial advice.

There's a lot of companies out there. It's easy to pick one that definitely won't get you in to trouble instead of one that probably won't get you in to trouble.

If you work for a company that grants stock via shares or options, you're going to have to sell them at some point. At which point insider trading applies.

And your company will carefully tell you when the safe times to do so (usually a month or so after a quarterly result or some such announcement)

its not that common. i have a friend who has blackout periods on his RSUs, but no company ive worked at with RSUs has any black out period.

every company I've worked for that's gone public (3 of them now) has had blackout periods

My very very very very large company doesn’t have stock lockup like that. I can sell my granted and vested stock at any time, unlike previous employers. Weird.

It really depends a lot on your role. I would assume your CFO, that knows the figures he will share in the market and analysts expectations, is indeed vetoed.

Most Senior Execs and the whole Financial division typically fall under these umbrellas.

My last company which was smaller, I was locked out for a month around earnings reports. I probably have more privileged information now, but I know not to trade on it by waiting the appropriate time.

>And your company will carefully tell you when the safe times to do so

not familiar with the whole situation, but I'd worry the company would tell me times that were advantageous for it, not necessarily for me.

on edit: I suppose the downvotes are HNs way of telling me that would be a silly thing to worry about. Thanks for the clarification.

on second edit: thanks for the actual clarifications as to why I would be silly to worry about that kind of thing.

I think its usually a very pre-arranged time (like once a quarter shortly after the quarterly earnings since you cant know what's in the next quarterly earning if the previous one just happened).

Besides, are there really bad and good times for the company? Its not like the company itself is affected, just the stock holders. Management wants stock to go up because management usually owns stock. So screwing you would also screw themselves.

Last of all, if you dont like the blackout periods, you can just setup an arms length plan to bypass it https://www.investopedia.com/terms/r/rule-10b5-1.asp

No, actually, it is the opposite. For legal compliance, the company tells you when it is safe for you to trade, assuming that you do not have any insider information that would affect the stock price during the allowed periods, without getting into legal trouble.

My company does this and it is a relief for legal compliance reasons.

That is true. And my philosophy is, I will sell the moment it vests (subject to sell windows of course). I will take the money and invest it elsewhere.

I think it's sound financial advice, I'm just saying "don't trade your company's stocks" isn't really a sufficient solution to avoiding insider trading.

Sure. But there are so many companies listed. Will the world for you totally turn upside down if you stay away from one listed company? Maybe a particular trade is legal, maybe it is not. Why bother to take the trouble?

Adding a note, according to the initial filings from the SEC:

>As further explained in Amazon’s Insider Trading FAQs, “puts, calls, warrants and other types of option securities” were required to “be cleared in advance with the Legal Department, regardless of whether that employee is otherwise subject to preclearance or to the trading window, even if that employee is not in possession of material nonpublic information.”

Amazon employees require Amazon's Legal approval before trading Amazon options.

page 6, #17-21

> puts, calls, warrants and other types of option securities

These are not stock. You definitely don’t need Amazon Legal approval to trade Amazon stock - otherwise all employees that get RSUs would need approval to sell their stock.

You're correct, let me update my wording.

> > “puts, calls, warrants and other types of option securities”

> Amazon employees require Amazon's Legal approval before trading Amazon stock.

Options are not stock, they're options. Employees are generally (maybe always?) restricted from trading in derivatives like options. That doesn't mean they can't trade stock (outside blackout windows).

Plenty of employers have company-wide blackouts for any stock trade in advance of earnings. So even if you don't have access to inside information you may be subject to company policies that prohibit it.

Yeah it's lame. Also they might prohibit shorting of the stock (always), preventing employees from locking in their stock option gains.

>Millions of investors do that with no problems.

Err, example please? I'm totally blanking here, not gonna lie.

If you are an insider at a company you work at, they tell you and you have to adhere to additional rules and blackouts around announcement and earnings time.

This is not common. In the story, the guy's wife worked in finance so had confidential info about earnings. The rank and file can trade whenever the hell we want with whatever stock we want, including our employer's. No one bats an eye.

Really? Even as a rank and file pleb I wasn’t allowed to trade except for about 2-3 weeks after earnings calls. I assumed that was the norm everywhere.

That is the norm. True insiders are subject to additional restrictions, and often set up a 10b5 plan to set conditions under which stock may be traded.

In almost every case, no employees (insider or otherwise) are permitted to sell derivatives (calls, puts), while they are employed.

I have been on insider list and subject to blackouts just for being a mobile developer. I don't know if all employees were considered insiders but at least all developers were.

Err, wouldn't most of these millions be employees of the company, who receive stock options as a benefit or a bonus?

Some employees get options. Others get grants or ESPP discounts.

You and your family doing your trades out of blackout periods, mainly. You can buy products or receive them as comp without problem.

Even if you do have access to insider information it should be (in my opinion) still legal to trade the stock.

There should instead be restrictions on the time for an order to go through, not on the act of insider trading.

Insiders are allowed to trade, however there are time limits. Plans to buy or sell must be disclosed well in advance and black out periods can apply.

If simply being husband of a woman who works for Amazon can help you acquire such information on which you can perform insider trading.

What stops from former workers at intelligence agencies from starting a hedge fund and employing all methods they learned while at work, to acquire such valuable information, trade based on that and offer others money management services?

> What stops from former workers at intelligence agencies from starting a hedge fund and employing all methods they learned while at work, to acquire such valuable information, trade based on that and offer others money management services?

That wouldn't be insider trading. Indeed hedge funds are known to use intelligence data like satellite photos etc.

If they use illegal monitoring devices, hacking for info etc, they may fall afoul of federal espionage, wiretapping or CFFA, but it would still not be insider trading.

> If they use illegal monitoring devices, hacking for info etc, they may fall afoul of federal espionage, wiretapping or CFFA, but it would still not be insider trading.

that would still be trading on material non public information which is prohibited.

I would hope that original/primary research would not result in insider trading charges. (If I have no other connection to a company and count cars in a retailer parking lot, foot traffic, or trucks leaving a warehouse and trade based on that information, I would expect and hope that those trades would be legal, even if the findings that I self-generated were material (and of course non-public).)

if the research is done with public information, of course there is no issue. If you go, for example, dumpster diving on shredded company documents then it might be an issue.

Note also that there are difference between US and EU. I think US might require a breach of duty of care somwhere in the chain of responsibilities for insider trading, while EU doesn't.

> if they use illegal monitoring devices, hacking for info etc, they may fall afoul of federal espionage, wiretapping or CFFA, but it would still not be insider trading.

Thats an interesting point, if I hack the CEO’s phone and get the earnings number a day ahead, then trade off them, I kind of wonder how that isnt insider information.

Although laws around that are so odd, especially in US, that it wouldn’t surprise me.

The SEC has historically treated hacked earnings reports as material non-public information, so the post you're replying to is incorrect: https://www.lexology.com/library/detail.aspx?g=fd5d5ca7-20c5...

(not a lawyer, not legal advice)

I'd guess the same thing that stops Senators from trading on inside knowledge of global issues.. nothing

Usually just the lack of startup capital and lack of pedigree to get wealthy enough investors

There isn’t an inherent legal issue here

Insider trading also requires you or the person you got information from to have a fiduciary or contractual duty not to share information

That typically ends after employment or when the NDA expires

There is nothing illegal about having an advantage in the market, if thats the assumption where you are starting from

There are laws against corporate espionage. In terms of legal intelligence gathering, hedge funds already do that: https://newsroom.haas.berkeley.edu/how-hedge-funds-use-satel...

How did his wife get no prison time?

They can't arrest a husband and wife for the same crime.

In case you missed the reference: https://youtu.be/75iv3RKQUAM

I have the worst fucking attornies

That's not at all true.

A reference to the TV show Arrested Development :) Terrible legal advice given to a crooked businessman!

Yes they can. And there are lots of examples.

Oh, sure, downvote a commenter because they didn't watch Arrested Development. c'mon, HN. :-P

Just speculation, but they may have children, and if so, prosecutors may have wanted to keep at least one parent out of jail.

It would be nice if prosecutors really were that compassionate. I've read that lots of kids end up in foster care because their parents go to jail. But maybe that only happens to poor people.

An alternative would be to have criminal parents serve time consecutively -- that way noone gets away, and the children would not have to be taken away.

From the article

> As part of the plea agreement, Bohra’s wife will not face criminal charges. Bohra’s wife is no longer employed at Amazon.

I understand the plea deal, but why. I am assuming they had evidence she gave him the data. Why let her off?

May be they would have to risk a trial to convict both but he would plea guilty to protect his wife. If the state believes he was the most responsible then they may judge a guaranteed conviction without the cost of trial to be worth it.

The wife (and family) lost 2.6 million, plus her job, and the husband - so it's not like she got away with something, just avoided the worst of the punishment.

disgorged 2.6 million, that means just losing the ill-gotten gains. It's not fair to call that "lost".

No. $2.6M "in disgorgement, interest and penalties." The ill-gotten gains were only $1.4M.

They had to pay back their gains, pay additional fees, and one of them serves jail time. They did not get away with anything.

If they kept the $2.6M in a liquid saving account just for cases like this one, yeah, that wouldn't be so bad. But I don't expect that's the case and in practice that could mean for example losing her house.

> I understand the plea deal, but why. I am assuming they had evidence she gave him the data. Why let her off?

"Giving someone the data" is probably a different violation to "trading with illegally obtained data".

She probably got a different penalty (breaking NDA or similar) then he did.

if you don't personally profit from the bet... it's not one.

>Insider trading violations may also include "tipping" such information, securities trading by the person "tipped," and securities trading by those who misappropriate such information.

It sounds to me like even giving information to someone if you know that person will trade is illegal.

https://www.investor.gov/introduction-investing/investing-ba...

She only committed some light treason.

They kicked back and relaxed, Emphasis on kickback.

Basically they were able to cough up the $2mm the SEC wanted in the parallel civil suit, and didnt attempt to challenge the criminal case, so the prosecutors in the criminal case chose not to

https://en.wikipedia.org/wiki/Women-are-wonderful_effect

Women generally get less time for the same crime.

I wonder if he would have been caught if instead of buying Amazon directly, he bought an index fund that has them? I think Amazon makes up something like 3% of some of the Vanguard index funds.

I assume that the guy bought some type of short term options on Amazon to bet on rising/falling stock prices. I don't think buying an index fund, even with insider information, would allow for such massive profits.

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