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Hacker Could Keep Money from Insider Trading
Reservoir Hill brings us a New York Times story about a man who will be allowed to keep the money he gained through hacking into a computer system in order to gain early access to a company's earnings statement. From the Times:
"On Oct. 17, 2007, someone hacked into a computer system that had information on an earnings announcement to be made by IMS Health a few hours later. Minutes after the breach of computer security, Mr. Dorozhko invested $41,671 in put options that would expire worthless three days later unless IMS shares plunged before that. The next morning the share price did plunge, and Mr. Dorozhko made his money by selling the puts. 'Dorozhko's alleged "stealing and trading" or "hacking and trading" does not amount to a violation' of securities laws, Judge Naomi Reice Buchwald of United States District Court ruled last month. Although he may have broken laws by stealing the information, the judge concluded, 'Dorozhko did not breach any fiduciary or similar duty "in connection with" the purchase or sale of a security.' She ordered the S.E.C. to let him have his profits."
If he were to say that I told him, them we would have the book thrown at us ... but if he cracks a machine then all is OK
Stupid!
I got it! I got it! Neuromancer, William Gibson, 1984!
Where's my prize?
c++;
I have some karma to burn, so I am going to go off topic / troll here.
Will whoever modded the parent a troll please share his or her logic? I will admit that it is not brilliant, so offtopic, maybe, overrated, maybe, but troll? That's just an insult. Personally, I am happy to see a first post that is not an AC "fp bitches!" and I think the effort should be rewarded.
I meta moderate about every other day, and I almost always rate the troll mods as "unfair". I don't know if this has any effect, but just so you know.
weirdest thing I ever saw: scientology advertising on slashdot.
You said it yourself, as highlighted above.
Pirate Party UK
That this is actually quite appropriate. Since he didn't have any fiduciary duty, the SEC shouldn't take his money away. That said, since it's profit from an illegal act, I would hope that the money would be taken away -- if and when he is convicted for the crime of stealing the data.
Too often in this country we seem to be throwing every law available at people and making up new ones to go with them, when the acts we're trying to punish are already illegal. If he didn't break securities laws, he shouldn't be punished under them. Since he did (we assume, but it hasn't yet been proven) break unauthorized access laws, he should be punished under those.
We don't need more laws against things that are already illegal, and we don't need to make a mockery of existing laws by applying them to things they don't apply to. On a related note, why do we need separate "identity theft" and "atm card fraud" laws, when anyone being charged with them is already also being charged with uttering false instruments and fraud? Our legal code needs to be smaller and simpler; making it so would make it more effective and efficient, not less.
If he got the information from the employee or from any other fiduciary of the company, that would be considered insider-trading under the "tipper" - "tippee" theory. The tipper has to be some insider (usually an employee) who gives information to the tippee (an outsider who would normally not be subject to insider trading rules). The main requirements IIRC are that the tippee actually has to know that the information is insider (non-publicly known) info, and know that the tipper is breaching his fiduciary duty in disclosing the information. This is a form of classical insider trading, as opposed to misappropriation theory that the Gov. was probably trying to pin on the defendant in this case.
AntiFA: An abbreviation for Anti First Amendment.
If the put option expires and the price is >= $90, then he loses money, because he now has to buy the stock for the "seller" of the put option for more than he payed for the contract.
He only loses the money he paid for the contract. In this case he'll just let the option expire and not exercise it. This is an OPTION, so he's not obligated to sell for $90.
The aim of cheating isn't always to have a 100% sure thing but to have an edge. Casinos don't make their money by having a 100% sure thing either, they do it by having an edge. But how would you like it if, while playing poker, your opponent could see the next 10 cards the dealer is about to hand out. Sure, he can't guarantee whether you want 0 cards or 3 or whether the dealer will suddenly decide to shuffle again, either one making it less than a sure thing, but he has an edge and an illegal one by the rules. At least its clear where a casino stands in the game. Never with a cheating player.
If this was a medium-sized company, he may have bought up a large % of puts for the day. His presence for puts played with market_supply/demand and made it seem more lucrative for others to join in -- only for them to be scammed. Yes, the others made their choice but they expected a fair game.
Umm... except that he's UKRAINIAN. Did anyone read the whole article? The DoJ isn't pursuing him because they perceive it to be fairly difficult to extradite from ex-Soviet bloc nations, especially on a hacking charge. Russian & Ukrainian crackers are frequently ID's violating US electronic theft and data tampering laws (mostly because we make it so easy for them, but, I suspect also because they make so much money doing it), and have been notoriously hard to prosecute. So, good luck on that one.
I'm thinking the guy's hard day doesn't come when we haul him off to an American jail. Rather, it happens real soon, now that the Ukrainian mafia knows he has nearly $300 grand...
Probably, but he's in the Ukraine. The SEC not releasing his money for insider trading wouldn't require the support of the Ukraine government, prosecuting him for hacking would.