Hacker Could Keep Money from Insider Trading 152
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."
That opens the doors (Score:5, Insightful)
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!
Re:Shortly after that (Score:3, Insightful)
I got it! I got it! Neuromancer, William Gibson, 1984!
Where's my prize?
Re:That opens the doors (Score:5, Insightful)
If a mate hacks a machine based on insider information, both the informant and the hacker are breaching a fiduciary duty. They're more likely to get useful information, and more likely to cause serious harm to the financial system. In my opinion, we want to deter hacking based on insider information more than random hacking.
That's not to say the fellow should get to keep the money. That will only serve to encourage random hacking pointedly in the absence of (traceable) insider information. However, trading on insider information should result in more significant consequences.
Re:Seems reasonable to me (Score:2, Insightful)
Troll? (Score:5, Insightful)
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.
Re:Seems reasonable to me (Score:5, Insightful)
You said it yourself, as highlighted above.
I'm inclined to say (Score:5, Insightful)
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.
Re:That opens the doors (Score:5, Insightful)
Re:Seems reasonable to me (Score:5, Insightful)
Re:Buying high, selling low, making money how? (Score:3, Insightful)
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.
Re:Troll? (Score:5, Insightful)
"Will whoever modded the parent a troll please share his or her logic?"
I did not/would not have modded him troll, but I can guess the simple logic at doing so.
He appears to have the all-too-common opinion that there is no such thing as a profitable but risky opportunity. I teach intro probability and decision making (among other things), and you would not believe how many people reason that, if there is uncertainty, it's "impossible" to make a good decision. The reasoning is "Well, since something bad might happen, you might end up regretting your decision." Ugh. Those are people for whom "probability", "expected value", etc., will forever remain magical, abstract terms with no application in the real world.
Before my rant goes too far off topic, back to the GP, who said:
"It is stock market after all, nobody can guarantee the outcome even with insider news."
So insider information should be ok?! After all, "there are no guarantees"?! Nonsense! And I can imagine there being at least a few mods who would consider it so obvious that this is nonsense, that they modded him troll, thinking there could be no other excuse.
Now I'm the one wondering how he got so many insightful mods!
Re:Fair enough (Score:1, Insightful)
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.
Re:Well slow down here (Score:2, Insightful)
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...
Re:Proceeds of crime bill ?! (Score:3, Insightful)