RBC IB analyst with insider info caught and charged ahead of client’s merger

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https://www.cnbc.com/2019/08/12/reuters-america-u-...
"Bill Tsai, 23, who graduated last year from New York University's Stern School of Business, was charged with one count of securities fraud, carrying a maximum 20-year prison term. Tsai was accused of buying Electronics for Imaging call options after learning it was negotiating a takeover by private equity firm Siris Capital Group LLC, an RBC client. The SEC alleges that soon after learning about the deal, Tsai purchased EFII call options, which he sold for a profit of approximately $98,750 shortly after the deal was announced in mid-April 2019."

The only reason this stood out to me was 1) how did the SEC figure it out? were they actively monitoring his account? 2) it's shocking that the SEC would go after someone for a relatively small amount (I stress SMALL because couple of tens of thousands is peanuts in the grand scheme of things when the SEC could be allocating their time and resources for funds that are trading millions/billions)

Comments (14)

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Aug 12, 2019

The SEC is not some stupid backwater agency; they work hard behind the scenes to promote equitable markets. It wouldn't be hard to catch this. Corporate Events like this usually require an SEC filing such as an 8K. The SEC machine looked for unusual trading in days/months prior to said filing. Some 23 year old kid somehow knows to buy 187 call options. So they check him out and see that he works at an investment bank handling said transaction. Barney Fife could have figured this one out. It's morons like this whom keep the SEC in business.

"As alleged in our complaint, Tsai reaped nearly $100,000 in illicit profits by misusing highly confidential information entrusted to him," said Joseph G. Sansone, Chief of the SEC Enforcement Division's Market Abuse Unit. "Using our enhanced analysis and detection capabilities, the SEC was able to act swiftly, exposing Tsai's misconduct just months after his illegal trading took place."

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Aug 13, 2019

You know, I've always been curious... so let's say, some joe schmo from my local gym and I with absolutely no connections at all, thoughtfully planned this out and I told him to buy 187 call options and that we will share the split. I wonder how SEC can prove this? Maybe if we lived in the radius of each other, that can prompt them to further investigate but let's say joe lived in bumblefuckville in the mid west and he and I both used burner phones, I just don't see how they can catch neither of us,

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Aug 13, 2019

During a tour of the NYSE long ago, I heard this tale.

There was a bigshot banker who would frequent a grimy dive bar in Chelsea, Manhattan after work. After a few tall whiskey sours, he'd start telling war-stories to a few patrons at the bar. A few of the patrons wised up and acted on the info upon realizing that this guy may be no joke. The SEC identified unusual trading volume out of this specific zip code by uneducated people who were otherwise unsophisticated in buying on margin or utilizing leverage. After inquiring a few of the individuals, the gig was up and they claimed, largely out of ignorance, that they got these great stock tips from the bigshot at the bar. The bigshot was busted and the rest is history.

As far as your tale, what you are describing is not unusual or unique. Raj Rajaratnam did just this with a network of code named connections behind fake emails and burner phones. In economics you learned about prisoner's dilemma. Can you really trust that if the heat comes on one, he or she will hold out? My detective friend has said that despite what you see in hiphop and mafia movies; people snitch to save their own.

Martha Stewart was a pawn in a similar scheme and the authorities simply wanted to know where she got her info from. Instead of cooperating and getting a slap on the wrist, she lied compounding her guilt.

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Aug 13, 2019

Sad... ruined his banking career before he barely got out of the gate.

There will always be those that think they can get away with murder because they've watched a forensics show or that they can get away with insider trader because they "neglected" to share a trading account with their company and think they'll never get found out.

https://www.sec.gov/litigation/complaints/2019/com...

Aug 13, 2019
InfoDominatrix:

Sad... ruined his banking career before he barely got out of the gate.

There will always be those that think they can get away with murder because they've watched a forensics show or that they can get away with insider trader because they "neglected" to share a trading account with their company and think they'll never get found out.

https://www.sec.gov/litigation/complaints/2019/com...

This wasn't a lapse in judgement or material mistake. This was a choice to disregard corporate policy and criminal code.

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Aug 13, 2019

This... if he had gotten away with this trade, do you really think he would stop there?

Aug 13, 2019

Agreed, it was totally intentional on his part.

Aug 13, 2019

The most shocking thing here is that some legit analyst would risk his entire career for a drop in the bucket, if you think long term.

But then again, for all we know, the guy had some serious financial problems and / or addictions.

Aug 14, 2019

He dropped 28K for the positions, I don't think he was hurting for money lol.

Aug 13, 2019

Extremely easy for the SEC to find these things. I actually disagree a little bit with the earlier commenter who said the SEC isn't a dumb backwater agency . . I think they may indeed be, but this would never get past a dumb backwater agency.

Deal gets announced. Look at everyone who bought recently. Then compare that buy to their other holdings . . was it unusual in any way? Do they normally trade in this size, etc.

What I'm describing above is the hard cases . . that's how they catch uncles, cousins and other people who insiders filter the trade through.

In this case, if the guy did it in his own account? Even easier.

Aug 14, 2019

Everyone is entitle to their opinion, but I have friends in the enforcement division and can assure you they are no fool; overwhelmed, yes. Fools, no. I could say a lot more, but probably shouldn't.

The biggest problem is the sheer size of the SEC. They have 11 offices around the country. Think about this. Say a money manager in Las Vegas is suspect of running a Ponzi Scheme. The SEC should investigate, but now individuals from the SF office need to trek over to Las Vegas consuming time just in transit.

Second, imagine all of the Snapchat, IG, and Twitter online stock schemes that are going on. Monitoring and tracking online items has compounded the sheer volume in complaints.

Lastly, this is a government agency with a budget. Increasing this budget increases taxes and likely will upset big donors who are hoping for less regulation. Conspiracy, maybe, but not unbelievable.

I'm impressed with what I have seen and heard and feel they do a good job. Most of their busts are not making headlines such as this instance, but rest assured; they are not some sleepy law enforcement agency.

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Aug 14, 2019
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