Do you wonder how the incredibly rich stay incredibly rich while your pension/401k/IRA seem to make trivial gains even when the market seems to be doing quite well? How do these big investors seem to make out when you can barely capitalize on these larger moves? Well, it is not your fault. As the folks on wallstreetbets will say, “this sir, is a casino.” And for retail traders it is. How do you compete when industry insiders make their moves first? How do you compete against those with insider knowledge? You do not, and the SEC and our legal system knows this. Hence insider trading is a crime. For some.
ProPublica recently had some documents leaked to them highlighting how some executives/CEOs are bypassing these rules. For example, let us take a hypothetical case of NVIDIA and AMD, two competing companies the two of which are a duopoly. There is nobody else making video cards on anywhere near such a scale. What if NVIDIA suddenly had a breakthrough that brought the cost down and increased efficiency by 100%? In that case it would be insider trading for the NVIDIA executive to purchase NVIDIA stock on that news. But what about AMD stock? What the ProPublica investigation has shown is that many other companies (the AMD/NVIDIA is a hypothetical) are actively engaging in transactions in the other companies’ stock with an uncanny ability to time the market. There is only one for this to happen, and it is not divine intervention.
The article goes on to mention executives such as August Troendle of Medpace, Isaac Larian of MGA (Bratz dolls) who have made millions on these types of trades of their competitors stocks. But this is just the tip of the iceberg. If the DOJ/SEC had any interest in prosecuting their overlords then we would no doubt found countless other examples.