Feds' Latest Insider Trading Indictment

How much trouble can your insta-messaging and texting get you into? Plenty.

Two former stockbrokers, age 34 and 32, who later went to law school together and are now lawyers, were indicted yesterday in the Southern District of New York for insider trading while they were stockbrokers. One is a lawyer in Denver. He was arrested today at his home in Lousiville, CO.

They texted about wanting to avoid jail and not end up like Martha Stewart. The odd thing about the Indictment: The "unindicted co-conspirators" (my translation: cooperators) made $700k. The Colorado lawyer made $2,500.00. (His indicted pal made $130 k.) The unindicted co-conspirator who started spreading the word is from Australia and returned there when he learned of the investigation.

Not only did this young lawyer get indicted for his $2,500. gain, the Southern District of New York is asking he be held without bond. The lawyer made his first appearance in court in Denver today, and according to the docket, he was remanded into custody and detention hearing will be held tomorrow. He's got a good lawyer, and I can't imagine he won't be granted bond, but still, seeking pre-trial detention seems like overkill by the U.S. Attorney's office. [More...]

The case began with an associate at the New York law firm that represented IBM in the upcoming deal. The law firm appears to be Cravath Swaine & Moore, since that's who represented IBM in the particular deal. The associate told his good friend, the Australian, who told his roommate, the stockbroker who is now a lawyer in Denver. The lawyer in Denver then told his buddy, the former stockbroker-turned-lawyer in Baltimore.

Here is DOJ's press release. Here is the Indictment. Here is the SEC Complaint filed against them.

Samples of the instant messages:

In Instant Message exchanges in July 2009, CONRADT and WEISHAUS discussed their insider trading scheme and the source of their Inside Information. For example, on July 1, 2009, WEISHAUS wrote to CONRADT, “somebody is buying spss . . . we should get [CC-1] to buy a f***load [of SPSS shares] . . . .” CONRADT responded, “jesus don’t tell anyone else . . . we gotta keep this in the family.” WEISHAUS answered, “dude, no way. i dont want to go to jail f*** that . . . martha stewart spent 5 months in the slammer . . . and they tried to f*** the mavericks owner.” Later that same day, WEISHAUS wrote to CONRADT, “jesus, we need spss to run up i need that lexus.”

Moral of the story: Don't discuss illegal activity on your blackberrys or iphones. Our federal prisons may be operating at more than 34% over-capacity, inmates may be double and triple bunked, but they are still likely to go after you.

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  • Display: Sort:
    Word usage alert, Jeralyn: (none / 0) (#1)
    by Anne on Thu Nov 29, 2012 at 07:43:00 PM EST
    I think you meant to write "Insider" Trading in the title and not "Insiding" Trading.

    This whole thing has me wondering if we really might be headed for "thought police" territory, where just thinking something can get you in hot water.

    If I have read this post correctly, these two (none / 0) (#2)
    by caseyOR on Thu Nov 29, 2012 at 10:22:04 PM EST
    guys did not just think about committing insider trading, they actually did it and made a profit, small though it was.

    I think the old advice to never put anything in writing is still valid today. People do need to realize that email and texts and IMs are today's writing.

    As to getting in trouble for one's thoughts, well we are already there. How many times now have we seen people in the U.S. charged with terrorism because they thought about doing something, maybe talked about it, but took no action until the FBI decided to give them a helping hand?  

    We have a case like that right now in Portland. A teenager who was mouthing off on the internet attracted the FBI's attention, and suddenly the FBI informant was telling this kid where to bomb (last year's Christmas tree lighting), showing him how to build the bomb, taking him to the coast to detonate a test bomb, and then providing the kid with backpack the informant said was filled with the bomb.

    The FBI led this kid every step of the way. I really don't think this kid would have done anything more than mouth off online if the feds had not latched on to him.


    Oh, I know this allegedly went beyond (none / 0) (#6)
    by Anne on Fri Nov 30, 2012 at 06:33:18 AM EST
    just the thinking stage, I guess it just bothers me that we really have no privacy anymore.  I get that posting on Facebook probably carries no expectation of privacy, but phone calls, texts and e-mails should - and increasingly don't.

    And the cameras are everywhere, too.

    As for the FBI, I can't remember the last terrorist plot they got credit for breaking up that they didn't also take the lead in creating in the first place.


    Anne, thanks (none / 0) (#3)
    by Jeralyn on Thu Nov 29, 2012 at 10:48:00 PM EST
    I was rushing not to be late for a dinner appointment and totally missed that. I'm so glad you point these typos out.

    Small potatoes (none / 0) (#4)
    by Dadler on Thu Nov 29, 2012 at 10:55:24 PM EST
    That's what the government goes after. Big players, no way.  Not that these guys are innocents, just that compared to the real crooks, these guys can barely carry their water.

    they ARE ,however, presumed innocent (none / 0) (#5)
    by Dadler on Thu Nov 29, 2012 at 10:55:57 PM EST
    Didn't mean to possibly imply otherwise.