Reported by Matt Levine, Columnist

Most of the cases of insider trading that I write about are dumb. There are two possible interpretations of this fact:

1. Most insider trading is dumb. Insider trading is a fairly easy crime to catch, so it is dumb to do it, so if you are doing it you will probably also do it in a dumb way.
2. Some (much? most?) insider trading is smart, but only the dumb insider trading is caught. Lots of people are out there doing insider trading with clever tradecraft and not getting caught, which is why I am not writing about them.

I think either interpretation is entirely plausible; I lean toward Option 1 but I have little evidence for that.1

Anyway here are a US Securities and Exchange Commission enforcement actionand a Justice Department criminal caseagainst some guys who, allegedly, did mostly pretty good insider trading? And yet not good enough?

The Securities and Exchange Commission today announced charges against Anthony Viggiano, a former analyst at a major investment firm and later at an international investment bank, and Christopher Salamone, Stephen A. Forlano, and Nathan Bleckley, for insider trading in advance of numerous merger and acquisition transactions.

According to the SEC’s complaint, in connection with his work at two financial institutions, Viggiano learned about impending merger and acquisition transactions and strategic partnerships before they were publicly announced. Viggiano, a resident of Baldwin, New York, allegedly obtained material nonpublic information about eight such transactions and tipped his friend Salamone, who grew up on the same block and whom he has known for approximately 20 years, about at least six of them. Salamone, a resident of Long Beach, New York, allegedly traded in advance of the six transactions, resulting in proceeds of approximately $322,000. Salamone allegedly agreed to share his trading proceeds with Viggiano because Viggiano’s own employer prohibited him from engaging in such trades. The complaint further alleges that Viggiano tipped his close college friend Forlano about at least four transactions and that Forlano made approximately $113,000 in illegal profits trading in advance of three of those transactions. Forlano, a resident of Tampa, Florida, also allegedly tipped other individuals, including his close, college friend Bleckley, a resident of Altus, Oklahoma, who traded in advance of two transactions, resulting in illegal gains of almost $25,000.

The case originated from the SEC Market Abuse Unit’s Analysis and Detection Center, which uses data analysis tools to detect suspicious trading patterns.

The investment firm was Blackstone Inc. and the bank was Goldman Sachs Group Inc. But the last sentence in that quote is the important one: The SEC can do data analysis to basically be like “this one guy has had a run of lucky trades on merger targets, let’s see what advisers worked on all of those deals, and which employees of those advisers grew up on the same block as the guy who traded.” A run of successful trades on deals is enough to trigger the SEC’s suspicions, and then they can figure out your connections to those deals. 

But, as these things go, Viggiano and Salamone seem to have insider traded in the basically smart way? The allegation is that Viggiano (the investment banker) got the inside information and Salamone traded on it: The insider did no trading and the trader had no obvious connection to inside information. The SEC complaint does not quote any incriminating emails or text messages between them, or any suspiciously timed phone calls, because there weren’t any:

In late 2022, Viggiano and Salamone agreed to be more careful to not leave a trail of their communications relating to their trading in Salamone’s brokerage accounts. Going forward, they would communicate in person or using SIGNAL. Viggiano told Salamone to download SIGNAL for future communications so no one could read their messages and their messages would not be preserved. Viggiano set the conversation rules in SIGNAL so that chats would expire five-minutes after they ended.

Read full report: https://www.bloomberg.com/opinion/articles/2023-09-28/goldman-insider-trader-did-his-best?utm_medium=social&utm_content=business&utm_campaign=socialflow-organic&utm_source=twitter&cmpid=socialflow-twitter-business&leadSource=uverify%20wall

Read criminal complaint: https://assets.bwbx.io/documents/users/iqjWHBFdfxIU/rAmdgQweZd5M/v0