Hacker May Get To Keep Insider Trading Windfall — Because He Obtained Info Illegally

from the say-that-again dept

The NY Times is covering a bizarre anomaly associated with “insider trading laws” in the US that may allowed a guy
to keep the nearly $300k he scammed by hacking into computers to learn of earnings info before it was actually released. Apparently, the way US securities laws work, if you legally obtain the insider info, you can’t trade on it. However, if you illegally obtain the info, you can trade on it, though you’re certainly potentially liable for the illegal actions that allowed you to get the info. In this case, the illegal actions were breaking into this computer. However, rather than being charged with computer fraud, he was charged with insider trading. In other words, he was basically charged with the wrong crime, and that may mean that he gets to keep the $300k and go on his merry way.

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Comments on “Hacker May Get To Keep Insider Trading Windfall — Because He Obtained Info Illegally”

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38 Comments
DisGuysed says:

Re: ummm

Yea umm, cracker refers to someone who cracks copy protection on software. Or a code cracker. This guy is still hacking. What you are trying to refer to is the good side of hacking vs the bad side. An analogy would be a sword master using his hacking to save the day and get the bitch or a sword master hacking into someone’s private chambers to kill their ass. Actually thats a bad analogy but you get the idea.

common_sense says:

mischaracterized, as usual

again, mike doesn’t tell the facts in the story – a ukranian resident committed the crime and authorities may have thought it would be difficult if unlikely to actually apprehend him or recover the loss. but don’t cast your doubts yet, the asset freeze still stands and a ruling is several months away. do yourself a favor if this case interests you and take mike’s gossip rag-like blurb with a grain of salt and go read the article for yourself.

jw says:

Re: And the government still gets its cut...

Not true. The government gets its cut on all reported income. Pimps and drug dealers aren’t known to regularly state their annual income with the IRS. For the government to get its share of that action, it would have to do something like the fairtax initiative is proposing.

R.H. (profile) says:

Re: Re: And the government still gets its cut...

And this is why the prosecution can’t use a tax return against you in a court of law. I could say that I was a pimp earning $45,000 a year from my ‘business’ and they couldn’t use it as evidence since otherwise by making it illegal to not file a return the government would be violating my right to not self-incriminate. However, I haven’t seen anything in the law prohibiting the government from using a tax return as ‘probable cause’ for a warrant or as a reason to just follow you around and wait for you to break the law.

NunYa says:

Re: Re: Re: And the government still gets its cut.

Try to find a law that states the legality of the “federal income tax”. Why do I have to pay to a privately held company a “tax” on the money I earn simply because they print it and tell the true Federal Government what it is worth and how much they too will pay to have the right to the gold that backs it.

Overcast says:

Apparently, the way US securities laws work, if you legally obtain the insider info, you can’t trade on it. However, if you illegally obtain the info, you can trade on it,

That must be the ‘Politician Protection Clause’ – to keep politicians from getting into troubles with insider trading.

This guy just got lucky and stumbled upon it.

Gene Hoffman (user link) says:

Understanding Securities Law

Crash course on insider trading law as it’s needed here. You have the right to trade on material non-public information. What you are not allowed to do is breach trust with an insider. If you overhear a Pubco CEO’s juicy M&A activity and you don’t know the guy, you can trade on it. If you’re his Dad or his Company’s lawyer, you can not.

This doesn’t match SEC’s policy preferences, but it happens to be the actual law.

This guy broke the ’84 Computer act but not Securities law.

-Gene

Ghost Genius says:

Cracker vs Hacker - You are all on Crack.

So, What year did “Criminal Hacker” become “Cracker”?
Why do you think Hacker is good or bad?
Can’t you focus on the subject…

I doubt any of you commenting on Cracker vs Hacker actually are able to do either of the two.

From someone who was a Cracker, Hacker & a Pirate:

Pirate – Someone who steels by any means. Usually relies on a Cracker to obtain his goods, though can be one in the same.

Cracker – Circa 1978 – Someone who “Cracks” the protection on something. NOT ANY RELATIONSHIP to “Criminal Hacker” though you thought you were so smart. To Crack is to Break (like an egg shell dummy) the software protection so that you can Pirate it.

Hacker – Circa 1980 – Someone who “Hacks” into a system. A Hacker is someone who breaks into an online system or into a computer system. It means trying over and over again until you acheive the goal.

Hacking – Recent – Has been mis-used to mean anything from good to bad, “A Hack” can be an engineer who wasn’t formally trained and “Hacks Away” at code until it works or until he figured out how a system/api/etc works. Usually bad code. Linux wasn’t “Hacked together”, it was engineered or programmed. This form of “Hacking” comes clearly from above, but it applied to programming.

Programmer – Someone who programs a computer, duh.

Now, for the guy who Hacked into the computer system and made money — you are a thief — just because some idiot charged you with the wrong crime doesn’t make you innocent, try enjoying your $300,000 from jail. Idiot.

Next time, to be a good hacker, go to some public place with no tracability to yourself and hack into the system on a public, or otherwise not yours, computer…the trick to Hacking is to be anonymous…

Anonymous Coward says:

“Cracker – Circa 1978 – Someone who “Cracks” the protection on something. NOT ANY RELATIONSHIP to “Criminal Hacker” though you thought you were so smart. To Crack is to Break (like an egg shell dummy) the software protection so that you can Pirate it.”

Ummm, this is Techdirt. When you crack the software protection, you are just freeing information and creating a new business model. You shouldn’t call it pirating or stealing it.

Gene Hoffman (user link) says:

Error in the article

Mike,

There is an actual error in the way you present the article. You state that obtaining insider information from legal means is illegal. It’s not. What is illegal is breaching a duty of due care to the corporation or a fiduciary duty – if you have one.

Clearly a guy breaking into a computer has about the opposite of a duty of due care or fiduciary duty.

-Gene

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