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The penalty against normal everyday people like these people seems much stiffer than the penalties levied at sophisticated financial professionals. The traders

by bmk44 4y ago

The penalty against normal everyday people like these people seems much stiffer than the penalties levied at sophisticated financial professionals. The traders operating hard-to-prove frauds with a "nod and a wink" approval from their supervisors at large banks and hedge funds always seem to be allowed to reap hundreds of millions of dollars in ill-gotten gains and if caught, give back only a tiny fraction of it, without even admitting guilt.

bawolff 4y ago
Are these really normal everday people?
qzx_pierri 4y ago
Do you have any sources for your claim? I realize this does happen, but I've always been interested in high profile examples of this (with proof).
teawrecks 4y ago
> give back only a tiny fraction of it, without even admitting guilt. a.k.a. their "cut" ;)
gruez 4y ago
>always seem to be allowed to reap hundreds of millions of dollars in ill-gotten gains and if caught, give back only a tiny fraction of it, without even admitting guilt. As per the SEC indictment, they earned $35k and $73k in ill gotten profits respectively, and were fined $99.7K and $79.9k. That's clearly more than "a tiny fraction"
- phkahler 4y ago
  Exactly. This is the little guy punishment, not the big guy who get hundreds of millions of dollars.
- olliej 4y ago
  Ok, if I steal a $300 TV, and get caught do I have the option to simply pay a $900 fine? Seriously, that's a heads I've made 30k, tails I lose some of my savings account. For people in this position that is all the penalty they received is. Worst case they extend their mortgage, which is already likely many times this fine and so the extension is of minimal impact. But also the people who commit fraud that takes out hundreds of millions of dollars (corporate collapses, etc) do make large amounts of money, and can plead poverty as a defense against full compensation. e.g. When Enron collapsed, few of the people responsible were jailed, and in fact were giving themselves bonuses mere days before it collapsed. So it lost people $45 billion directly attributable to fraud, and emptied its regular employee's 401ks and pension funds. The victims whose 401ks and pensions were emptied won all of $85 million of the $2 billion that was stolen, and investors got 11 billion. So they stole billions, repaid a quarter of that, and few actually went to jail. Of the fraction that were sent to jail I can't find evidence that they had to return any of the 700+ million in bonuses they received in the year leading up to the collapse, let alone the prior fraud based bonuses.
  - gruez 4y ago
    > Ok, if I steal a $300 TV, and get caught do I have the option to simply pay a $900 fine? As another commenters have mentioned, the SEC doesn't have authority to bring criminal changes. That's on the DoJ. Therefore the rest of your rant about how people aren't being punished doesn't really apply. Also, according to US federal sentencing guidelines, insider trading actually gets you harsher punishment compared to theft[2], 2 more points to be exact. For the duo mentioned in TFA, it's a difference between 10–16 months (for theft) and 15–21 months (for insider trading). >e.g. When Enron collapsed, few of the people responsible were jailed, and in fact were giving themselves bonuses mere days before it collapsed. So it lost people $45 billion directly attributable to fraud, and emptied its regular employee's 401ks and pension funds. The victims whose 401ks and pensions were emptied won all of $85 million of the $2 billion that was stolen, and investors got 11 billion. So they stole billions, repaid a quarter of that, and few actually went to jail. Of the fraction that were sent to jail I can't find evidence that they had to return any of the 700+ million in bonuses they received in the year leading up to the collapse, let alone the prior fraud based bonuses. Can you reference specific cases here? It's easy to point at a giant organization where Something Bad happened, and demand that everyone involved be punished, but that's not how the justice system works. You can't enact some sort of collective punishment for everyone involved with enron, you have to prosecute each person individually for the specific offenses that person committed. I suspect the reason for the lack of fines is that they didn't actually do anything illegal, or that they were difficult to prosecute, not because it's legal to defraud people. [1] https://www.ussc.gov/guidelines/2021-guidelines-manual/annotated-2021-chapter-2-c#2b11 https://www.ussc.gov/guidelines/2021-guidelines-manual/annot... [2] https://www.ussc.gov/guidelines/2021-guidelines-manual/annotated-2021-chapter-2-c#2b14 https://www.ussc.gov/guidelines/2021-guidelines-manual/annot...
__derek__ 4y ago
This is why the SEC has a lucrative whistleblower program: > The Commission is authorized by Congress to provide monetary awards to eligible individuals who come forward with high-quality original information that leads to a Commission enforcement action in which over $1,000,000 in sanctions is ordered. The range for awards is between 10% and 30% of the money collected. [1]: https://www.sec.gov/whistleblower https://www.sec.gov/whistleblower
- DangitBobby 4y ago
  Seems like they could blackmail the perp for 30-100% instead, or get it on it 50/50.
  - __derek__ 4y ago
    I don't have direct experience, but the first option reminds me of regex ("now you have two problems"), and the second looks like a fragile coalition.
    - DangitBobby 4y ago
      I also don't have direct experience, but I would guess some of the same things that motivate someone to run afoul of the SEC would motivate someone else to conspire with them rather than "kill the golden goose."
- nico 4y ago
  That doesn’t sound very appealing. A lot of people in Wall Street, especially the ones with access to the kind of information to become a good whistleblower, make $500k+/year. That means those people are actually very unlikely to want to tell on others, unless maybe they are already on their way out.
  - __derek__ 4y ago
    This appears to assume that the whistleblower would have to leave the company afterward, which may not be justified given (a) the strong anti-retaliatory protections, (b) the highly-regulated nature of Wall Street, and (c) the nature of these settlements. Maybe they're shuffled off to the bench until retirement, though. Again, I don't know anything, though. I just appreciate the game theory.
initplus 4y ago
Insider trading laws apply to everyone, professional or amateur alike. Probably worse for a professional because you jeopardise your career prospects at the same time. And insider trading is just so much easier to discover and investigate compared to other kinds of financial crime.
dcolkitt 4y ago
This really isn't the case. Federal sentencing guidelines for white collar crime are pretty much determined by the amount of money involved in the crime. Now what is probably true is that the sophisticated professionals probably end up with lesser charges, and therefore lower sentences than outright security fraud. That's not for lack of trying, but simply because it's generally pretty hard to prove guilt beyond a reasonable doubt against someone who's done both a reasonable job at covering his tracks and has access to high-powered defense attorneys. So what really happens is the Wall Street trader might do insider trading on say $100 million. But the evidence trail is pretty nebulous, the case would drag on for years, and a US Attorney doesn't want to waste their career making case on a highly uncertain case. So the hedge fund manager settles for a civil "failure to supervise" fine. (Even Michael Milken wasn't convicted of insider trading, but the lessor crime of 'parking'.) In contrast the dipshit amateur does something stupid like leave a trail of text messages with his golf buddy, and then buys a weeks worth of volume in thinly traded out of money call options. The case is open and shut and they get nailed on the full charges.

by bmk44 4y ago

bawolff 4y ago

Are these really normal everday people?

qzx_pierri 4y ago

Do you have any sources for your claim? I realize this does happen, but I've always been interested in high profile examples of this (with proof).

teawrecks 4y ago

> give back only a tiny fraction of it, without even admitting guilt. a.k.a. their "cut" ;)

gruez 4y ago

>always seem to be allowed to reap hundreds of millions of dollars in ill-gotten gains and if caught, give back only a tiny fraction of it, without even admitting guilt. As per the SEC indictment, they earned $35k and $73k in ill gotten profits respectively, and were fined $99.7K and $79.9k. That's clearly more than "a tiny fraction"

phkahler 4y ago
Exactly. This is the little guy punishment, not the big guy who get hundreds of millions of dollars.
olliej 4y ago
Ok, if I steal a $300 TV, and get caught do I have the option to simply pay a $900 fine? Seriously, that's a heads I've made 30k, tails I lose some of my savings account. For people in this position that is all the penalty they received is. Worst case they extend their mortgage, which is already likely many times this fine and so the extension is of minimal impact. But also the people who commit fraud that takes out hundreds of millions of dollars (corporate collapses, etc) do make large amounts of money, and can plead poverty as a defense against full compensation. e.g. When Enron collapsed, few of the people responsible were jailed, and in fact were giving themselves bonuses mere days before it collapsed. So it lost people $45 billion directly attributable to fraud, and emptied its regular employee's 401ks and pension funds. The victims whose 401ks and pensions were emptied won all of $85 million of the $2 billion that was stolen, and investors got 11 billion. So they stole billions, repaid a quarter of that, and few actually went to jail. Of the fraction that were sent to jail I can't find evidence that they had to return any of the 700+ million in bonuses they received in the year leading up to the collapse, let alone the prior fraud based bonuses.
- gruez 4y ago
  > Ok, if I steal a $300 TV, and get caught do I have the option to simply pay a $900 fine? As another commenters have mentioned, the SEC doesn't have authority to bring criminal changes. That's on the DoJ. Therefore the rest of your rant about how people aren't being punished doesn't really apply. Also, according to US federal sentencing guidelines, insider trading actually gets you harsher punishment compared to theft[2], 2 more points to be exact. For the duo mentioned in TFA, it's a difference between 10–16 months (for theft) and 15–21 months (for insider trading). >e.g. When Enron collapsed, few of the people responsible were jailed, and in fact were giving themselves bonuses mere days before it collapsed. So it lost people $45 billion directly attributable to fraud, and emptied its regular employee's 401ks and pension funds. The victims whose 401ks and pensions were emptied won all of $85 million of the $2 billion that was stolen, and investors got 11 billion. So they stole billions, repaid a quarter of that, and few actually went to jail. Of the fraction that were sent to jail I can't find evidence that they had to return any of the 700+ million in bonuses they received in the year leading up to the collapse, let alone the prior fraud based bonuses. Can you reference specific cases here? It's easy to point at a giant organization where Something Bad happened, and demand that everyone involved be punished, but that's not how the justice system works. You can't enact some sort of collective punishment for everyone involved with enron, you have to prosecute each person individually for the specific offenses that person committed. I suspect the reason for the lack of fines is that they didn't actually do anything illegal, or that they were difficult to prosecute, not because it's legal to defraud people. [1] https://www.ussc.gov/guidelines/2021-guidelines-manual/annotated-2021-chapter-2-c#2b11 https://www.ussc.gov/guidelines/2021-guidelines-manual/annot... [2] https://www.ussc.gov/guidelines/2021-guidelines-manual/annotated-2021-chapter-2-c#2b14 https://www.ussc.gov/guidelines/2021-guidelines-manual/annot...

__derek__ 4y ago

This is why the SEC has a lucrative whistleblower program: > The Commission is authorized by Congress to provide monetary awards to eligible individuals who come forward with high-quality original information that leads to a Commission enforcement action in which over $1,000,000 in sanctions is ordered. The range for awards is between 10% and 30% of the money collected. [1]: https://www.sec.gov/whistleblower https://www.sec.gov/whistleblower

DangitBobby 4y ago
Seems like they could blackmail the perp for 30-100% instead, or get it on it 50/50.
- __derek__ 4y ago
  I don't have direct experience, but the first option reminds me of regex ("now you have two problems"), and the second looks like a fragile coalition.
  - DangitBobby 4y ago
    I also don't have direct experience, but I would guess some of the same things that motivate someone to run afoul of the SEC would motivate someone else to conspire with them rather than "kill the golden goose."
nico 4y ago
That doesn’t sound very appealing. A lot of people in Wall Street, especially the ones with access to the kind of information to become a good whistleblower, make $500k+/year. That means those people are actually very unlikely to want to tell on others, unless maybe they are already on their way out.
- __derek__ 4y ago
  This appears to assume that the whistleblower would have to leave the company afterward, which may not be justified given (a) the strong anti-retaliatory protections, (b) the highly-regulated nature of Wall Street, and (c) the nature of these settlements. Maybe they're shuffled off to the bench until retirement, though. Again, I don't know anything, though. I just appreciate the game theory.

initplus 4y ago

Insider trading laws apply to everyone, professional or amateur alike. Probably worse for a professional because you jeopardise your career prospects at the same time. And insider trading is just so much easier to discover and investigate compared to other kinds of financial crime.

dcolkitt 4y ago

This really isn't the case. Federal sentencing guidelines for white collar crime are pretty much determined by the amount of money involved in the crime. Now what is probably true is that the sophisticated professionals probably end up with lesser charges, and therefore lower sentences than outright security fraud. That's not for lack of trying, but simply because it's generally pretty hard to prove guilt beyond a reasonable doubt against someone who's done both a reasonable job at covering his tracks and has access to high-powered defense attorneys. So what really happens is the Wall Street trader might do insider trading on say $100 million. But the evidence trail is pretty nebulous, the case would drag on for years, and a US Attorney doesn't want to waste their career making case on a highly uncertain case. So the hedge fund manager settles for a civil "failure to supervise" fine. (Even Michael Milken wasn't convicted of insider trading, but the lessor crime of 'parking'.) In contrast the dipshit amateur does something stupid like leave a trail of text messages with his golf buddy, and then buys a weeks worth of volume in thinly traded out of money call options. The case is open and shut and they get nailed on the full charges.