Convicted Insider Traders Probably Regretting Association With Group Calling Itself “Fight Club”

It gives me no particular pleasure to update the ol’ insider trading sentencing chart every time a new person is convicted of insider trading, but I view it as a public service for the less instinctually law-abiding among our readers and here we are:

After three days of deliberations, a jury convicted Anthony Chiasson, a co-founder of Level Global Investors, and Todd Newman, a former portfolio manager at Diamondback Capital Management. The two had denied charges that they participated in a conspiracy that made more than $70 million illegally trading technology stocks.

Anyway chart (background here):

As, like, half of Manhattan gets convicted of insider trading, this chart has gotten a bit raggedy; various forms of cooperation or sympathy or silliness of the sentencing guidelines will move you off the predicted lines. The model spit out 8 years for Rajat Gupta and no one really thought that would happen; he ended up getting two. Zero, for particularly compelling cooperation/sympathy, is a disproportionately popular number.

So the quants at Dealbreaker Labs have refined the chart a bit to reflect not only the two main “official” variables that affect insider trading sentences – amount of money and whether you went to trial – but also the most important unofficial variable, which is: who is the particular person sentencing you? Turns out that, for instance, Gupta’s judge, Jed Rakoff, is an equal-opportunity non-fan of the financial industry and its regulators, who in sentencing Gupta “criticized the advisory federal sentencing guidelines, deriding them as ‘the mirage of something that can be obtained with arithmetic certainty.'”

And then there are the people who like arithmetic certainty! Judge Richard J. Sullivan, who ran Chiasson and Newman’s trial and will sentence them, is pretty by the book. His sentences are the big purply (plea) or pinky (trial) boxes in the scatterplot, and other than Gautham Shankar, who got probation after wearing a wire to catch other insider traders, everyone’s been at or above the line predicted by the Official Dealbreaker Insider Trading Sentencing Model. Which makes the model look good, but – given the supposed $70mm of insider trading profits that they made – is not so nice for Chiasson’s and Newman’s prospects.

2 Former Hedge Fund Managers Found Guilty in Insider Trading Case [DealBook]
Earlier: Accused Insider Traders Already Guilty Of One Thing

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6 Responses to “Convicted Insider Traders Probably Regretting Association With Group Calling Itself “Fight Club””

  1. Playing it straight says:

    I'm willing to bet this will show up on CNBC at some point. I think it's the only (pseudo) analysis of its type out there, and it's both funny and interesting.

  2. Portfolio Manager X says:

    It's like I always say, if you're thinking about stealing 800 bills you might as well make it a mil.

  3. guest says:

    No footnotes?

  4. Detail guy says:

    You're slipping Chart-boy and Fum-Fum. Ganek's in the chart, but Newman's in the exerpt.

  5. EQ in Dallas says:

    REDO : X – Axis to display how much they kept post SEC clawbacks… thx