Insider-Trading Indictment Shows Ties To Bloomberg News Scoops (cjr.org) 32
For more than six months, federal prosecutors say, a New York man used inside information to make illegal profits in the stock market -- and a core element of his alleged scheme was his interaction with Bloomberg News, which published several stories shortly after the trader arranged to make significant purchases of the companies' shares. From a report: Last month, a federal grand jury indicted Jason Peltz on multiple counts of securities fraud, money laundering, tax evasion and lying to the FBI. Peltz, 38, is accused of working with over a half-dozen unnamed and unindicted co-conspirators to learn about impending takeovers and other market-moving news, and to move money between accounts as a way to hide his role and profits. The indictment notes that Peltz's moves were timed closely to stories that ran at "a financial news organization."
While the newsroom isn't named, federal officials cite five stories and their timestamps -- all of which match precisely to pieces that ran on Bloomberg News' website. Each of those stories had shared bylines, but only one reporter is identified as an author for all of the articles: Ed Hammond, who worked at the Financial Times before coming to Bloomberg more than six years ago to cover mergers and acquisitions. In 2017, Hammond was named Bloomberg's senior deals reporter in New York -- a highly prestigious post in that newsroom. The feds allege that Peltz used disposable "burner" phones and encrypted apps to communicate with a journalist, and that the reporter provided "material nonpublic information about forthcoming articles" which Peltz used to trade in the market "just prior to publication of an article about each company written by the reporter." The indictment describes "numerous contacts" between Peltz and a reporter, including at least one in-person meeting. Neither Hammond nor Bloomberg is named in the indictment; the filing says a financial-news reporter's identity was made known to the grand jury that heard the case. No one at Bloomberg is accused by prosecutors of wrongdoing or of being aware that these stories might be linked to an insider-trading scheme. Prosecutors make no allegation that the stories contained any inaccurate information, nor do any of the stories display corrections.
While the newsroom isn't named, federal officials cite five stories and their timestamps -- all of which match precisely to pieces that ran on Bloomberg News' website. Each of those stories had shared bylines, but only one reporter is identified as an author for all of the articles: Ed Hammond, who worked at the Financial Times before coming to Bloomberg more than six years ago to cover mergers and acquisitions. In 2017, Hammond was named Bloomberg's senior deals reporter in New York -- a highly prestigious post in that newsroom. The feds allege that Peltz used disposable "burner" phones and encrypted apps to communicate with a journalist, and that the reporter provided "material nonpublic information about forthcoming articles" which Peltz used to trade in the market "just prior to publication of an article about each company written by the reporter." The indictment describes "numerous contacts" between Peltz and a reporter, including at least one in-person meeting. Neither Hammond nor Bloomberg is named in the indictment; the filing says a financial-news reporter's identity was made known to the grand jury that heard the case. No one at Bloomberg is accused by prosecutors of wrongdoing or of being aware that these stories might be linked to an insider-trading scheme. Prosecutors make no allegation that the stories contained any inaccurate information, nor do any of the stories display corrections.
Illegal? (Score:2)
Re:Illegal? (Score:4, Insightful)
Sounds like the reporter was tipping him off to the news stories before they were published rather than creating the stories.
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"Sounds like the reporter was tipping him off to the news stories before they were published rather than creating the stories."
I guess via email and that's the only reason this is presented to us as 'news for nerds, stuff that matters'.
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How is this different than someone shorting a stock (like GME for example) then making news about how bad GME is doing?
If it's unreleased information then it's insider trading. If it's previously released information and you are just endlessly doting on bad news then you are manipulating public perception. Frankly, both should be illegal but currently only one is.
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The summary states, pretty clearly, that he got financial information from a reporter before the stories were published, and used that information to predict changes in the stocks, which he then profited from. You got things backwards. This is clearly someone using inside information to make trading decisions.
What the shorties are doing is worse. Different, but worse. Media manipulation is just one part of it.
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I'd say that the difference is that the person - or institution - shorting is obviously the one plugging the "bad news".
There was a better example a couple of years back. Not long after the Heartbleed vulnerabilities - and shortly after AMD started selling their new Ryzens - some Israeli company started spreading the story that they had found similar catastrophic vulnerabilities in Ryzens, although they were short on details. They had apparently bought some Put-Options before releasing "bad news" with ano
The real questions is (Score:2)
Why did the journalist have access to insider information early?
That he gave the information away may or may not be legal or ethical. But he shouldn't have had anymore privileged access to it than anyone else.
No, that is not the real question. (Score:5, Insightful)
How could anyone report on the issues if he has no information? He's a reporter. That's what they do. It isn't the contents of the article itself that is "insider knowledge" it is the fact that that information is about to be published. The news itself impacts the market, knowing that impact is coming, ahead of time, allowed Peltz to profit from the changes in valuation caused by the reporting.
It's not "company A did a thing" that is the inside information. After all, it's about to be published in a news article. It's the fact that a news article about company A doing the thing is about to be published that is the insider information.
If the reporter simply uncovered the information (legally), and invested based on what he found, that would simply be called due diligence. It would not be insider trading, as he is not an insider to the company in question. He is an insider in his own news room.
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Information in as-yet unpublished news reports counts as confidential. Really, it's more "non-public information" than just confidential. Overhearing a conversation about a possible merger and then buying stock before the merger is announced counts.
The real question I have is - why isn't the reporter being charged?
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Not a lawyer, but perhaps simply passing that information along, without profiting from it, doesn't count? If not, it should. Also, the reporter may have cut a deal with the DA.
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It is a necessary thing really. People want to know the details about deals like these, the people involved want to promote themselves, etc etc. There really isn't a downside apart from the rare times like this one. As far as breaking the rules it is far more common for journalists to collude with fund managers
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Why did the journalist have access to insider information early?
The information may, or may not, have been from inside the company itself. The Bloomberg reporters are very very good at intuiting what is going on from various sources (and yes, some sources are just rumors). Sometimes what is going on is in plain sight, but no one else is looking, or seeing the obvious connections (in the old days, you could sometimes tell if a tech company was about to release a new product by looking at how many cars were on the parking lot on the weekend as they did their final push,
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If the information isn't from inside the company itself and from the journalist's intuiting from various sources and rumours, then making use of the information is not insider trading.
Re: The real questions is (Score:2)
He has sources that work at publicly traded companies, that give him information. There's nothing remotely controversial or illegal about that, he's not breaking a SEC rule by publishing the news.
Using non-public information to trade is illegal though. Giving it to someone you know does might also be? Not sure if he'd have to gain something from that relationship for him to be breaking the law, but the guy using non-public information to trade is breaking the law.
I ain't a lawyer, but I think you can go
Re: The real questions is (Score:2)
That's what I was getting at, public as in you have access to it, is not public by the SEC's definition.
IOW, It was on display in the bottom of a locked filing cabinet stuck in a disused lavatory with a sign on the door saying Beware of the Leopard. The gist of the SEC rules are to prevent a company burying bad news like that so that a privileged few get a head start unloading their shares, for example.
You take that, get it published in a major paper or whatever the law says, then it's public by the SEC's
Pump and dump (Score:2)
Pump and dump schemes are easier than ever before. Not sure how to solve it.
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Get rid of imaginary company currency, aka stocks.
The fact that a company's imaginary worth can go from millions to nothing and back again based nothing more then faith is a dumb way to run an economy.
--
Greed is a cancer that consumes everything it touches.
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That's only because you choose to take their market cap as worth, rather than their balance sheet.
No law can stop you from choosing an ill-considered metric to base your own perceptions on.
Would somebody educate me (Score:1)
How come the right wing nutjobs aren't screaming bloody murder about this interference in the Free Markets (TM)... all I hear from them is crickets.
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Amazing Double Standards (Score:3)
Companies working in the Mergers and Acquisitions field of financial services have such strict rules in place that they are literally not permitted to allow an employee who is working on an M&A deal (who is ‘read in’ to the deal) from discussing that engagement with anyone else in the company, even another M&A department employee, if they are not read in.
Yet the same rules apparently allow that same company to discuss the M&A deal under some kind of ‘embargo’ rule with a journalist? Who then tips off a mate so the mate can buy shares?
How can this possibly be considered logical or reasonable? The big banks that have M&A Teams have the most incredibly strict rules for this... They are legally required to have “information barriers”... They don’t share things like mail servers or network shares or intranet portals with anyone else; they have physically segregated areas in buildings; they have a direct street entrance, so client representatives aren’t escorted through non-M&A offices. The lengths the big financials have to go to in order to protect themselves from an accusation of insider trading is pretty extreme.
Yet they can talk to a journalist under an embargo-style NDA.
What on earth were the regulators thinking?
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How can this possibly be considered logical or reasonable? The big banks that have M&A Teams have the most incredibly strict rules for this...
There are rules in play here, and it looks like he broke them, hence he is going to court. Is this not logical or reasonable?
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But that wasn't quite the point I was trying to make - so sorry if I wasn't very clear.
My issue was simply that if you work in a bank, in an M&A unit, with access to "MNPI" (Materially Non-Public Information") or "SCI" (Sensitive Commercial Information) then banking regulation prohibits you from discussing what you know with any other colleague outside of your local information barrier under any circumstances. Yet if we follow this story, we discover that the same ban
Making news (Score:1)
Peltz was making news and money (hey what's more American than that? paraphrase from the movie "Clue") While others waited for it to happen. Now he is news...nothing gets in the way of profit. Too bad Trump isn't in office, he could have gotten a pardon with a little grease, graft, and a rebate.
JoshK.
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Too bad Trump isn't in office, he could have gotten a pardon with...
You can only be pardoned if you are convicted of something first. Just because a prosecutor claims something to be true doesn't mean it is.
But, but, Orange man bad... [pewresearch.org]
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Point taken. But in the American justice system, you're guilty as charged not innocent. And the prosecutor charges someone with so many charges to get them to plead out, be guilty in the system under the law, and then they'll need a pardon. Then the guilty person will have to foot the bill for the cost of the legal proceedings.
Ford pardoned Nixon, but yet Nixon wasn't charged with anything, and resigned to avoid impeachment.
If the reporter was from Fox Business (Score:2)
I can't see any reason not to indict the reporter, who couldn't possibly have been ignorant of how the information was going to be used. Except of course political bias favoring Bloomberg.