Insider Trading Alive and Well

   Hats off to the SEC. They always see to catch the little guy trying to trade on a little inside information while completely ignoring multi-billion dollar ponzi schemes. It should serve as a reminder to anyone who is considering committing insider trading with capital reserves of less than $100 million---you will be caught within days. Only the big boys are allowed to trade on inside information like the person who purchased 40,000 out of the money put options on Bear Stearns 8 days before it collapsed (have not heard from the SEC on that trade).  Reuters is reporting that the SEC has just caught 2 Spanish traders who bought out of the money call options on Potash Corp. days before the BHP bid:
The Securities and Exchange Commission has charged two residents of Madrid, Spain with insider trading and obtained an emergency court order to freeze their assets after they made nearly $1.1 million in illegal profits by trading in advance of last week's public announcement of a multi-billion dollar cash tender offer by BHP Billiton Plc to acquire Potash Corp. of Saskatchewan Inc.

The SEC alleges that Juan Jose Fernandez Garcia and Luis Martin Caro Sanchez purchased - on the basis of material, non-public information about the impending tender offer - hundreds of "out-of-the-money" call option contracts for stock in Potash in the days leading up to the public announcement of BHP's bid on August 17. Garcia is the head of a research arm at Banco Santander, S.A. - a Spanish banking group advising BHP on its bid. Garcia and Sanchez jointly spent a little more than $61,000 to purchase the contracts in U.S. brokerage accounts. Immediately after BHP's offer was announced publicly on August 17, Garcia and Sanchez sold all of their options for illicit profits of nearly $1.1 million.
   I wish the SEC would go after bigger prizes like high-frequency trading. This is the most important issue considering it was rogue bots who caused the May 6th crash. But I guess the SEC has more important things to do such as watching porn

Black Swan Insights


1 comment:

  1. As long as their are markets their will be indider trading.