Comment by dataflow | Hacker News Reader

Comment by dataflow | Hacker News Reader

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> Whether this is fraud or not basically hinges on whether you were being intentionally dishonest, right?

No.

Do you mean legally? or morally?

Legally the offenses include things beyond what might strictly be "fraud" (see "fraud or deceit" as one example, but there are more [1]). IANAL, but failing to mention that your posts are with the hope of raising the price because you have a vested interest in that... seems like a material omission, if nothing else.

Morally (and I'd expect legally based on the text, but IANAL) what matters is what he expected to happen as a result of his posts on the message board. If he knew people would likely buy the stock in response to his posts, and he intended to take advantage of that influence to make money off those sales, that's the end of the story. Whether he sincerely believed the stock would actually rise regardless is beside the point.

> But now how do you distinguish between malice and stupidity?

I'll assume you mean good faith because stupidity isn't in the picture here. Someone who's genuinely predicting the stock market correctly isn't stupid.

Do you sincerely believe this person didn't expect his messages to raise the stock price, or that he didn't intend to take advantage of such a rise to make money off the stock sales? I sure don't.

[1] https://www.law.cornell.edu/uscode/text/15/77q

> failing to mention that your posts are with the hope of raising the price because you have a vested interest in that... seems like a material omission, if nothing else.

And if you run around telling people that you just bought some of the stock you think is going to the moon, is that supposed to make them less inclined to buy it, or do they now just think you're putting your money where your mouth is?

> what matters is what he expected to happen as a result of his posts on the message board.

Which is the problem. How do you prove what's inside of someone's head? Especially if they are malicious and know what not to say out loud.

> Someone who's genuinely predicting the stock market correctly isn't stupid.

If you think the stock is going up 1000% and it only goes up 300%, you were wrong, and your pick was wrong, and the people waiting for it to go up 1000% before selling are the people who lost money when it went back down. But as far as I know, being initially wrong and then changing your mind before you lose your money isn't illegal.

The rabbit hole is deeper than you think.

https://en.wikipedia.org/wiki/Mens_rea

FWIW, there are other examples of where securities laws where intent (which is difficult to prove) is needed in order to demonstrate a law has been broken. e.g. Spoofing.

Intent is often not that difficult to prove. It isn't murder if you were just sitting in the bell tower innocently cleaning your sniper rifle and it accidentally went off and put a round through the head of your sworn enemy, but you're entitled to reasonable doubt, not preposterous fabrications.

The problem here is that the innocent behavior and the prohibited one are basically identical and neither of them is particularly implausible.

I don't have the energy to dissect all this, but you're completely conflating legality, enforcement, and provability. We have juries for a reason. Most would a priori find it hard to believe that someone who found a winning strategy would repeatedly post it on random message boards with altruistic intent.

Juries need some basis on which to make a decision. The law is ridiculous if it only turns on whether you had a lawyer ahead of time to tell you what not to say while operating the identical scam.

It's not clear why telling people you think a stock is going to go up after you've already bought it would require altruism, and more than that you would benefit by building a reputation as someone who makes accurate predictions if you turn out to be right, independent of whether anyone acts on your statement by buying the stock.

> The law is ridiculous if it only turns on whether you had a lawyer ahead of time to tell you what not to say while operating the identical scam.

You'd be very shocked...

... but that's essentially what criminal defence is about :-/ In a sense half the value of having a defence lawyer is having somebody to remind you not to say stupid things to the police/investigators/prosecution.

Of course it's not really as simple as that, but you'd be surprised at the number of convictions where the prosecution relied on something stupid the defendant said. If (say) 50% of convictions "turns on whether you had a lawyer ahead of time to tell you what not to say", is the law ridiculous? Because that's what it generally is like (not just for securities fraud cases).

PS: for cases where it's particularly easy to feign ignorance/innocence, sometimes the law specifically states that the mens rea requirement is waived (i.e. the intent/knowledge does not matter, or does not need to be proved beyond reasonable doubt). This in turn gives opportunity for defence lawyers to argue this infringes on the right of the defendant to be presumed innocent..

> If (say) 50% of convictions "turns on whether you had a lawyer ahead of time to tell you what not to say", is the law ridiculous?

Yes.

It's entirely believable that at least 50% of laws are ridiculous.

> for cases where it's particularly easy to feign ignorance/innocence, sometimes the law specifically states that the mens rea requirement is waived (i.e. the intent/knowledge does not matter, or does not need to be proved beyond reasonable doubt).

But that's not the issue.

If you go out to the parking lot and your key fob unlocks someone else's car of the same make and model, e.g. because the manufacturer screwed up and made any of the keys open any of the cars, and then you claim that you thought that car was yours when you drove off in it, the prosecution now has to prove that you intended to steal someone else's car. Which they may yet even be able to do, if there is other evidence that implies you knew what you were doing, but it's completely reasonable that they have to prove it.

Whereas if you went out into the parking lot and broke the window of a car and then hot wired it, your actions are evidence of your intent. And, importantly, it's generally difficult to avoid actions that signal your intent while perpetrating a car theft.

The actual problem for this type of securities laws isn't just that the prosecution has to prove your intent, it's that their only means to do that is effectively a confession. There is no plausible way to operate a chop shop such that hiring a lawyer ahead of time would keep you out of prison when you get found out, but for parts of the financial industry that's what happens, which is absurd. There is no justice in a law that can only be enforced against people without effective counsel.

> Most would a priori find it hard to believe that someone who found a winning strategy would repeatedly post it on random message boards with altruistic intent.

That doesn't make it right, though, at least in my mind. There's accountability on both sides in these cases. People reading message boards and treating the contents as financial advice are not taking sufficient care, particularly when they click past / agree to the statement on their trading platform that says that their money is at risk. Their money was at risk, and they did it anyway.

My impression is this would come down to the jury's bias in either direction, when it should be pretty clear cut: you buy random stuff hoping to get rich, be it stocks picks from an Instagrammer, or NFTs, or whatever, and it is you choosing how to gamble your money.

If I were in a casino and a guy was holding a sign saying I should put all my money on number 8 on Roulette, it wouldn't matter if he were the casino owner, and stood to gain, or was just a random guy. It's up to me to decide what to do with the advice.

yup, especially if they are not including the standard: "Disclosure: I have positions in this security."

This could be interpreted as (and/or variously written to indicate) "this person is just talking up his/her book" or "they like it so much they have skin in the game".

Plus the factor of how much noise there is to any signal in the social media & message boards, how much attention can one reliably actually get for your shilling?

Wrong vs provably wrong are often different

I think you misunderstood. The guy bought the stock, posted on some forum that he got the stock and it was going to the moon, and then he saw a 300% increase in whatever period they said. At the time they posted, they believed there would be a 1000% increase in price. But now they’re seeing 300%, and thinking they should get out now instead of trying to chase the high point, 300% is still a good profit.

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