Maybe this would have worked last year. But traders are probably a little nervous when it comes to buying inside information since the Galleon insider trading case. Hedge funds are now well aware that the SEC and FBI are willing to use a broader range of investigation techniques including wire taps and undercover agents.
That’s probably exactly what they were thinking when they got this mysterious email in March 2010:
“Hi, I have access to Disney’s (DIS) quarterly earnings report before its release on 05/03/10 [sic]. I am willing to share this information for a fee that we can determine later. I am sorry but I can’t disclose my identity for confidentiality reasons but we can correspond by email if you would like to discuss it. My email is firstname.lastname@example.org. I count on your discretion as you can count on mine. Thank you and I look forward to talking to you.”
According to the criminal complaint, at least 33 investment firms received the email. It’s not clear which firms alerted the SEC or the FBI.
The FBI sent in “Al Tyson”, a hedge fund trader to discuss the purchase of the inside information. Al was was an undercover FBI agent. The FBI also used undercover agents “Kurt” and “Bill Evers” in separate discussions. There was even a confidential informant for the FBI: “Oscar.”
Bonnie Hoxie worked for Disney as an executive assistant and thought she could get pre-release earnings information. Her boyfriend, Yonni Sebbag sent the emails.
Bonnie and Yonni must not have heard of the Galleon insider trading case. I’m sure the investment firms they contacted have heard of Galleon and I’m sure are extra cautious of insider trading cases. Especially anonymous emails offering to sell inside information.
I guess they smelled a rat instead of a mouse.
- SEC Complaint: SEC v. Sebbag and Hoxie
- DOJ Complaint: US v. Sebbag and Hoxie
- SEC Press Release: SEC Charges Disney Employee and Boyfriend in Brazen Insider Trading Scheme
- Fortune Favors the Bold, But Not the Bold and Foolish by Bruce Carton in Compliance Week‘s Enforcement Action
- Sting Operation Catches Two Insider Trading by Tom Gorman
- Disney Duo Arrested in Insider Trading Scheme by Zachery Kouwe in Dealbreaker
- Disney Insider-Trading Probe: Criminals Do Not Take Note by Nathan Koppel in WSJ.com’s Law Blog