In The Future, 20-Something BF/GF Will Restrict Their Insider Trading Chatter To Pillow Talk Instead Of Work Email

When you're 26 and 27 it's hard not to commit securities fraud in the dumbest way possible.
Author:
Updated:
Original:
Getty Images

Getty Images

Here are some thing that can lead to grave acts of stupidity:

  • Being young
  • Being in love
  • Being a 20-something working in finance in New York and the associated feeling of "I make 120k/year, I must be hot sh*t"

Put them all together and...well, let's just say Colin Whelehan and Sheren Tsai have been there.

Colin Whelehan, 26, went to Harvard, and Sheren Tsai, 27, went to New York University. The couple met when they went to work at the same bank shortly after graduating from college, the government said...In late 2015, Whelehan learned of the Apollo takeover of ADT, after Apollo asked the firm if its corporate parent, a sovereign wealth fund, would invest with Apollo to help finance the deal. The firm ended up advising Apollo, and Whelehan was on the deal team that had access to Apollo’s data room containing key financial information about the transaction. He sent the tip about the deal from his work e-mail account to hers, according to the complaint.

Not a great idea, guys! But wait, there's more:

Tsai panicked when the price dipped before the deal was announced. "So when is it going to BOUNCE," she wrote to Whelehan in one exchange quoted in the court papers. "I wish I had bought it now, man." He replied: "I told you to average down," a reference to buying more shares at lower prices. But she said she had already put in too much cash to buy more. Tsai was caught just three days after the deal was announced on Feb. 16, when her firm’s chief compliance officer asked her why she had bought the ADT shares in January. She initially claimed she invested because she thought it was a good company, until confronted with the e-mails with Whelehan on her work account.

Boy Meets Girl, Boy Gives Inside Information to Girl, SEC Says [Bloomberg]
shershegoes [Instagram]

Related

News

Connection To A Company Called "Yeah Baby" Not Even The Best Part Of "High School Buddies" Insider Trading Scam

Over the past several years, much has been made about the supposed incompetence of the Securities and Exchange Commission. The regulator failed to realize Bernie Madoff had been running an illegitimate Ponzi scheme, despite more or less being told by Bernie Madoff himself, "I am running an illegitimate Ponzi scheme." It went after David Einhorn, when it should have been going after Allied Capital, the company the hedge fund manager told them was committing fraud. Its proposal for stepping up investigators' games was to start a Fraud College.* Until recently, it employed individuals in the office responsible for "ensuring exchanges follow guidelines concerning...computer audits, security, and capacity" who had "little or no experience with exchange technical matters." At this point, there have been so many stories about the SEC getting things wrong that the default is to assume it fucked up, even when that is not actually the case. What's more, even when Team Schapiro is on top of its game, resources are so strained that many scams that should be caught fall through the cracks. So you can maybe understand why a group of "high school buddies," along with a few other guys they picked up along the way, who were engaging in securities fraud, weren't too worried about getting caught.

News

David Slaine, Government's Undercover "Tip-Mining Machine," Apparently Under The Impression Insider Trading Works On A 3-Strike Basis

Remember David Slaine? For those who need a refresher, he is the former Morgan Stanley managing director and ex-Galleon trader who began working as an FBI informant in 2007 and who was outed for doing so by the Wall Street Journal in January 2010. At the time, we learned a few notable things about Slaine, some of them germane to his role in helping the government go after people trading on material non-public information, others special in their own way, like: 1. He takes french fries, and perhaps all snacks, very seriously. In 1993, Slaine triggered a fist-fight with a colleague on the trading floor after needling him because he wouldn’t share his french fries. Others broke up the fight. 2. He doesn't wait for people to towel off and get dressed before knocking their teeth out. One morning early in 2001, before trading began, Gary Rosenbach, then was the No. 2 executive under Mr. Rajaratnam, and Slaine were in a steam room together after exercising at an Equinox Fitness Club. Mr. Rosenbach was pressuring Mr. Slaine to improve his performance. As Mr. Rosenbach lay on his back on a bench, Mr. Slaine punched him, giving him a black eye and ending their friendship. 3. Humans aren't the only ones often asked "you want a piece of me?" He once smashed a computer keyboard in a fit of rage, says a person familiar with the incident. 4. While working on Wall Street, he eschewed the traditional channels of employee recruitment (Wharton, etc), preferring instead to pick up fresh analysts at the club. While at Morgan Stanley, he met [Craig] Drimal, then a nightclub bouncer at the Vertical Club in Manhattan. The two quickly formed a friendship based on a shared passion for weight lifting and their mutual ability to bench-press 400 pounds...Shortly after arriving at Galleon, Mr. Slaine persuaded Galleon officials to give a position to Mr. Drimal, who then was working as a bouncer at the Roxy nightclub in Manhattan. 5. Being a person with whom he "formed a friendship based on a shared passion for weight lifting and [a] mutual ability to bench-press 400 pounds," possibly the greatest line written about anyone who's ever worked on Wall Street and which which cannot be said enough, means little in the long run if he knows you've been playing it fast and loose with securites laws. In July 2007, the FBI showed up at Mr. Slaine's door on W. 57th Street in Manhattan and confronted him. Mr. Slaine agreed to help the government. At the time, federal prosecutors in Manhattan were trying to make headway on another investigation that eventually led to the charges involving Galleon. They asked Mr. Slaine who he knew that might be participating in insider trading. Mr. Slaine's answer: his friend Mr. Drimal, according to people familiar with the matter. In September 2007, Mr. Slaine—identified in the complaint as CS-1—tried out his body wire for the first time, meeting Mr. Drimal in New York. During the meeting, Mr. Drimal gave Mr. Slaine a piece of paper with four stock symbols, according to the complaint. He told Mr. Slaine the four companies were all acquisition targets. At the meeting's end, Mr. Drimal told Mr. Slaine to destroy the list. He warned him to "be careful" in trading the securities because no news of the takeovers had surfaced publicly...After the meeting, Mr. Slaine went to a nearby hotel where an FBI agent was waiting, says a person familiar with the matter. The pair went to a room where Mr. Slaine removed the wire. Anyway, Bloomberg recently checked in to see what Slaine's been up to these last couple years and other than his "multi-year experience" with the FBI being "tremendously traumatic," he seems to be doing pretty well.

News

Woman Who Insider Traded On (Two-Timing) Boyfriend's Behalf Did So In The Hopes Of Taking Relationship To The Next Level

In the summer of 2009, Jessica Mang, far left, met an investment banker named Thomas Ammann at a nightclub in London. Both liked what they saw and started seeing each other "at least once a week," on days he wasn't with his other girlfriend, Christina Weckwerth. Things were going well, but by November, Mang wanted more. So when Ammann said he was going to take her on a romantic getaway to Seychelles, and all she had to do first was use her own money to trade on material non-public information he'd obtained from his job at Mizuho International about Canon’s purchase of OCE NV, she jumped at the chance. Not only did he want to go away with her (huge!) but he was entrusting her with such an important project (huger!); Mang had read all the dating books and knew that when a guy asks you to violate securities laws, it meant things were getting serious. “He basically said that I show him that I trust him -- I invest the money, he still hadn’t specified how -- once that’s done, we’ll go on holiday in the Seychelles,” Mang said today at a London criminal court. “I thought that was a massive leap in commitment.” She said Ammann told her if she didn’t do it, “he didn’t want to be with me anymore.” “I thought, you know, this is a relationship that’s going to go somewhere, I definitely thought we were exclusive as well,” Mang said. “It wasn’t just sleeping together, in my mind we were definitely boyfriend-girlfriend from the start.” Ammann suggested that she should invest so they could build a future together, which she said she thought was a “very sweet and considerate thing he was doing.” Things that are unanswered at time but presumably be cleared up by the time the trial concludes: 1) When Ammann asked Weckworth to insider trade on his behalf (in April 2009), did he dangle a vacation in her face, too? Did she agree to the deal because she also thought it was indication wedding bells weren't far off, or was she just in it for the financial gain? 2) UNDER WHAT CIRCUMSTANCES* COULD THIS MISUNDERSTANDING POSSIBLY OCCUR: Mang said she didn’t know what due diligence was and “thought it was just a cute nickname he had for me.” If you have any ideas, we're all ears. Ex-Banker’s Girlfriend Says Trades on Tips Showed Trust [Bloomberg] Earlier: Girlfriend Insider Trading On Two-Timing Boyfriend’s Behalf Found Roommate’s Judgment A Little Uncalled For Related (re: breaking the law for your boyfriend because he promises to take you on vacation): What To Do (Or Not Do) Upon Waking Up In A Car “Driving Through A House,” Part II *Did overhear a phone conversation in which he told someone "I'm spending 80 hours a week doing due diligence," and she assumed he meant her? Because otherwise we've got nothing.

News

Ben Bernanke Insider Traded On His Mortgage Or Something

News

Lady Who Traded On Inside Information Obtained From AshleyMadison.Com Paramours Will Not Do Time

News

Convicted Insider Trader Garrett Bauer Hoping College Kids Will Help Him Get Off

Remember Garrett Bauer? For those who need a refresher, GB was a trader (who "mostly worked from home") who was charged last year for running a decades-long insider trading scam with an M&A attorney, Matthew Kluger, that involved stealing information from several law firms. (In April 2011, 20 FBI agents knocked on Bauer's door to arrest him which, while terrifying, didn't come as much of a shock-- the duo had recently become suspicious that the authorities were onto them and, naturally, went about destroying evidence, a process Bauer recounted to a cooperating witness in a conversation he didn't realize was being recorded, telling the CC: "My heart was beating ten thousand miles an hour. I went right up to my apartment and I broke the phone in half and went to McDonald's and put it in two different garabage cans. And someone was watching me. I thought it was an FBI agent. And I asked him, 'Do you know me? You look familiar.' And, like, I was so panicked. I literally didn't sleep that entire night...I can't sleep. I am waiting for the FBI to ride into my apartment. I am on edge all night thinking they are coming in.") Anyway, Bauer ultimately pleaded guilty and is set to be sentenced today. Though he could receive up to 11 years in the big house, a judge will be taking into consideration letters "expressing support or urging leniency" sent on Bauer's behalf, some of which were written by fans he's gained working the college lecture circuit the past few months, explaining to undergrads why they don't want to follow in his footsteps (hint: it involves sleeping on bunk-beds). “I’m here hoping you won’t commit the same crime I committed, insider trading,” Bauer told the students at NYU’s Stern School of Business in February. “I feel remorse. That’s why I’m here. It’s my way of trying to apologize to everyone for what I’ve done and try to make amends.” Bauer said he hopes that his “scared straight” message, delivered in 147 speeches since last fall at business schools, law schools, churches and synagogues, will move the judge to grant him leniency. Sentencing judges can consider whether a defendant has accepted responsibility and shown remorse for his acts. “I’m not blind anymore,” Bauer said in an interview. “I see how wrong it was, how unfair it was to everybody else that’s trading. You get away with it once, and then you think you can get away with it every time. I almost never considered the question of getting caught. It was more a question of let’s figure out a way to make money and not lose money.” Bauer spoke several times a week in person or via Skype at schools including Harvard University, Yale University, the University of California at Berkeley, the University of Texas, the University of Michigan and Duke University. He booked his own speeches, sometimes called “Confessions of an Inside Trader.” Bauer gave the same basic narrative in two appearances observed at NYU, as well as at Cardozo Law School in New York, Drexel University in Philadelphia and a Rutgers University class in Jersey City, New Jersey. Bauer, lean at 5-foot-11 and 145 pounds, favors button-down shirts and khaki pants. He speaks rapidly in a nasal voice, lacing his account with jokes...In every talk to students, Bauer discussed how 20 FBI agents came to his apartment to arrest him and how they played the tapes for him, as well as his time in the Hudson County Jail. He tried hard to show no emotion to violent criminals. “Saying it’s a scary place kind of understates it,” he said. “It’s the scariest place on earth.” At least one professor believes Bauer's talk scarred his students for life, which should count for something. And according to Sameen Singh, a recent Stern grad who will soon start a job at Morgan Stanley, U.S. District Judge Katharine Hayden ought to go easy on the guy, who is just another bro. “I was impressed by how human he was and how his friendships and relationships played a role in his crimes. My friends were quite taken aback by how similar he was to them. He came from humble beginnings, and he’s not a deviant mastermind criminal. He’s just a regular guy.” Prison-Bound Bauer Reprises ‘Confessions Of An Inside Trader’ [Bloomberg]

News

Attention Would-Be Insider Traders: SEC Undaunted By Fancy Foreign Languages, Use Of Email Outside Of Continental United States

Back in May 2010, a Wells Fargo employee named Waldyr Da Silva Prado Neto got a hot tip that Burger King was going to be bought by private equity firm 3G Capital Partners. Realizing he was in possession of some valuable information, Da Silva Prado Neto did what any rational person with an elastic view of securities laws would, and shared the material non-public information with some clients and friends, making about $175,000 and also putting himself in the good graces of pal he tipped off, who probably promised to return the favor. DSPN used Portuguese to communicate the message that he had information that might be of interest ("If you are around call me at the hotel," he emailed one customer. "I have some info…you have to hear this"), which seems pretty standard, given that he's Brazilian, though at least one person at the SEC is pretty sure it was an attempt to throw regulators off the trail, not realizing the lengths the Commission will go to to fight crime. "Prado's emails and other communications may have been sent from Brazil and written in Portuguese, but our commitment to prosecute illegal insider trading on U.S. markets knows no geographic or language barrier," said Sanjay Wadhwa, deputy chief of the SEC enforcement division's market abuse unit. Will they pony up the money for Rosetta Stone tapes? Probably not. But they sure as hell will take the time to put words into Google Translate and then nail you to the wall. SEC sues ex-broker for insider trading ahead of Burger King deal [Reuters]

News

Convicted Insider Trader Matthew Kluger "Shocked" To Find Out He Couldn't Trust The Guys With Whom He Was Committing Federal Crimes

Remember Matthew Kluger? To recap, he's the mergers and acquisitions lawyer who spent two decades feeding inside information to convicted insider trader Garrett Bauer, that he picked up from partners at the six different law firms he worked at over the years. The operation, which included Kenneth Robinson, an old friend of Kluger who acted as the tips mule between MK and GB, went very smoothly for a very long time (17 years), and would have continued going smoothly had Robinson stuck with the plan instead of deciding to start making the same trades as Bauer, raising suspicion with SEC, which was watching the men and used "relationship analysis" to determine they were "part of the same trading scheme and had a common source: Kluger." In March 2011, federal agents showed up to Robinson's house and after thinking it over for a couple days, he decided to cooperate by giving prosecutors a step-by-step guide to how the scam operated, telling them Kluger's name, and recording conversations with Kluger and Bauer in which the two said things like "I went right up to my apartment and I broke the phone in half and went to McDonald's and put it in two different garbage cans" and "I can't sleep. I can't sleep. I'm waiting for the FBI to ride into my apartment" and "We have to get all the fingerprints off that money. Like you wearing gloves or something and wiping every bill down or something" and "There is no way [these cell phone conversations] could ever be recorded." Robinson was ultimately sentenced to 27 months in prison, Bauer got nine years (despite his 147 speeches about how insider trading is a bad idea on the college lecture), and Kluger was handed 12 years, beating Raj Rajaratnam for "the longest insider trading U.S. history." Recently, Kluger sat down with Bloomberg to offer a few more specifics re: how the scheme went down ("Sometimes it was a deal I was working on, sometimes it was a deal I heard being discussed in the office"; "I would call Ken and say 'X/Y/Z company is considering a takeover of Q company") but what he really wants to talk about? What was the biggest surprise and hardest punch to the gut in all of this? Is what it was like finding out that his buddies were stiffing him on cuts of their ill-gotten gains. "On the day I was arrested, when they showed me the criminal complaint against me, finally that day, I saw the amounts that had been traded and I was absolutely shocked. Our agreement from the beginning was always that that profits were being shared equally three ways. I felt very used and manipulated, that he was basically pumping me for information, that he was then lying to me about how he was using and then allowing his obviously better friend to make millions and millions of dollars while telling me that that was not happening. “Maybe you want to laugh and say of course there’s no honor among thieves,” Kluger added. “But even when you’re doing something you’re not supposed to do, I trusted that they were honoring the commitments that they had made.” You can imagine Kluge's utter dismay to find out that such was not the case. It's one thing to get nailed for insider trading, it's another to find out you could've been making 10 times the profits while doing so.