
Everything everywhere is securities fraud - dwohnitmok
https://www.bloomberg.com/opinion/articles/2019-06-26/everything-everywhere-is-securities-fraud
======
robocat
Summary: a third party in the US provides synthetic Toshiba shares (without
Toshiba's consent or input).

But the buyers have sued Toshiba using the US court system!

"Toshiba Corp. is a Japanese company whose stock is listed in Japan. It has
unsponsored Level 1 ADRs in the U.S., through no fault of its own. [Toshiba]
did a fraud. U.S. investors lost money on their ADRs and sued, and Toshiba
objected that it had nothing to do with those ADRs, or with U.S. securities
markets in general. Last year a U.S. federal appeals court let the lawsuit go
forward".

I also love this quote from Matt "If you are a member of the global insider-
trading Illuminati, please tell me about it over unencrypted email."

~~~
yborg
"Synthetic" shares seems like a bit of a misnomer, these are actual shares of
Toshiba stock bought overseas and then held by a US entity that sells receipts
on them.

This seems to be a cautionary tale for anyone thinking of buying such things,
since theoretically you are just screwed if something like foreign accounting
fraud tanks the value. But since this is the US and you can file a lawsuit
against anything under the sun, these investors tried, and apparently
succeeded in bringing a suit against a Japanese company for Japanese crimes in
US court.

~~~
solotronics
The Chinese version of this is super sketchy and I am surprised it has lasted
this long. Chinese companies are under no obligation to follow our securities
and accounting laws. I am sure they are doing all kinds of illegal things such
as not setting the shares aside in China and lying about their accounting. A
big mess.

~~~
miohtama
Here is a documentary about it on Netflix. Though not vouching in for the
quality as a film, it tells how these frauds were structured

[https://www.netflix.com/title/80221646](https://www.netflix.com/title/80221646)

~~~
aspenmayer
What's the title? If you aren't logged in to Netflix, that link just shows an
error.

~~~
nkurz
Accessing from the US, I get an error as well.

This Netflix link seems to work though: [https://dvd.netflix.com/Movie/The-
China-Hustle/80221646](https://dvd.netflix.com/Movie/The-China-
Hustle/80221646)

Or on Rotten Tomatoes:
[https://www.rottentomatoes.com/m/the_china_hustle](https://www.rottentomatoes.com/m/the_china_hustle)

------
froindt
Matt Levine does a great job writing, and I highly recommend his newsletter.
He talks extensively about the weird things that happen in the finance and
hedge fund world, such as Windstream botching a bond and getting called out on
it years later by a hedge fund. Or dozens of examples of things where you'd
think "that's gotta be insider trading" but is completely legal.

~~~
JaimeThompson
A lot of the things that people think are insider trading are legal only
because those doing them have paid for enough lobbyists to make it legal.

~~~
ksdale
Do you have examples?

In my own personal experience, people are most often mistaken about what is
insider trading due to a combination of a vague sense of unfairness and a lack
of background knowledge about the reasons for insider trading laws and the
exact harm those laws are designed to prevent.

Matt Levine has written extensively about this and it's all quite interesting!

~~~
JaimeThompson
There have been some rather weird price moves in some stocks relating to
various congressional committees apparently tipping off people before the info
was publicly released.

While I can't find it right now I recall studies that showed that the typical
return on a Senator's investments was at least 11% greater than would be
expected which is a data point to take into consideration.

I do agree it is all very interesting and will read more of his works when I
have time.

~~~
IAmEveryone
So... Congressmen are paying lobbyists to lobby... congress?

~~~
inscionent
More, congress and their friends like to make side money.

------
jluxenberg
Ah, Matt Levine is always worth a read! You can receive his column by email
(for free!) if you subscribe here:
[http://link.mail.bloombergbusiness.com/join/4wm/moneystuff-s...](http://link.mail.bloombergbusiness.com/join/4wm/moneystuff-
signup?source=msweb)

(sharing this here because Bloomberg's website makes it really hard to find)

------
elipsey
Life hack: don't store anything you don't want to explain in front of a judge.

For practical purposes, "store" includes "put in a computer".

Consider that:

\--Saying you committed a crime is definitely incriminating, so storing that
is probably not in your best interest.

\--You are not qualified to know that you are _not_ breaking the law.

\--In fact, the only way to determine this affirmatively is by trial.

\--If you think no one important cares, you might still piss off someone
important later (Corollary: pissing off someone important is a good way to
find out whether you have broken the law).

~~~
2Ccltvcm
This is the best argument in favor of strong privacy laws I have heard so far

~~~
imgabe
I don't think privacy laws extend to things that have been subpoenaed by a
court or collected as evidence.

~~~
elipsey
They might prevent fishing expeditions though.

I would encourage readers to see Moxie Marlinspike's essay on this subject.
The thesis is that the ability to capriciously and selective prosecute anyone
is stiffing to dissent, and prevents political change. Students of recent US
history understand that this is far from purely theoretical.

"if everyone’s every action were being monitored, and everyone technically
violates some obscure law at some time, then punishment becomes purely
selective. Those in power will essentially have what they need to punish
anyone they’d like, whenever they choose, as if there were no rules at all.

Even ignoring this obvious potential for new abuse, it’s also substantially
closer to that dystopian reality of a world where law enforcement is 100%
effective, eliminating the possibility to [directly] experience alternative
ideas that might better suit us."

[https://moxie.org/blog/we-should-all-have-something-to-
hide/](https://moxie.org/blog/we-should-all-have-something-to-hide/)

Edit: To be clear, I think you make good point that privacy laws won't save
you from a subpoena. However, they are probably useful for other reasons; this
was why warrants and other notions of due process were created to begin with,
including the requirement that a warrant or subpoena be limited in scope to
that material which is relevant to a particular charge or investigation. I
think one big problem today is that people are ordered to surrender
"everything on your phone and cloud", etc. This is at least equivalent to
search warrant for "your filing cabinet", if not "everything you have ever
written or said."

~~~
Dkastro92
This is very interesting. We surrender, for example, to the posibility of
preventing the suffering of people by the acts of others becouse that, would
make us dystopian.

~~~
elipsey
Respectfully, did you read the article? The thesis is that dragnet
surveillance is stifling to political change and may result in an ossified
society. There are trade-offs other then security vs safety.

------
piker
In the unrelated later article about the "Chicken Libor" later in the
document, he says:

> Anyway it totally worked? “Georgia agriculture officials suspended the index
> late that year after some poultry companies declined to provide documents
> attesting to the accuracy of the data they submitted.” One possible reading
> is that companies were willing to lie about chicken prices, but they weren’t
> willing to lie about whether they were lying about chicken prices. 4 I
> suppose you could try that with real Libor too.

He missed the point. These guys were willing cause the company to lie. But, as
the certifications presumably came from the individuals making them, were
unwilling to be personally liable for the statements' accuracy. It's the same
principle that underpins executive liability under SarBox.

[Edit: Huge fan nonetheless. Incredible volume of high level content comes
from this guy.]

~~~
feintruled
I loved that article. You might be right about the personal liability aspect
but maybe there is something else at play too? Perhaps the amount of cognitive
dissonance increases beyond some bearable threshold when asked to specifically
confirm the lie (basically lie twice).

Similar to how when you ask a child "Are you sure it wasn't you who broke the
vase?" They made the additional denial, surely once that step has been taken,
the hard work is done.. but you can practically see the additional
psychological pressure!

------
AznHisoka
_" You know the basic idea. A company does something bad, or something bad
happens to it. Its stock price goes down, because of the bad thing.
Shareholders sue: Doing the bad thing and not immediately telling shareholders
about it, the shareholders say, is securities fraud."_

Immediately telling them would still make the stock price plummet and you'll
still lose probably the same amount of money. I think what most people want
is: Tell me and _only me_ first when there is something bad, so I can sell
before the stock goes south.

~~~
kolbe
And then shareholders sue their own company, and for every dollar of the
settlement that they take out of their own pockets to give to themselves, they
give 20 cents to a lawyer.

------
benj111
It seems to me theres some kind of balance between ignoring crimes that aren't
committed inside your borders, and prosecuting crimes regardless of where they
are committed. It seems to be a generally good thing to punish a company for
employing slaves on their African plantation. Less good to be suing a European
bar for selling to 'underage' 18 year olds.

If you start prosecuting everything and trampling over the laws of other
nations, aren't they then going to start trampling back. Internet companies
are largely US companies, how are they going to be able to function if they
have to follow mutually exclusive laws. Eg if promotion of homosexuality is
illegal in X, and free speech is protected in Y and both nations enforce their
laws globally, what do you do?

~~~
ndiscussion
You defer to the most powerful. Right now you bow down to the United States.
If the United States doesn't care about your case, you bow down to China. And
if they don't care, you bow down to Russia.

If they don't care, best of luck to you... you're on your own.

~~~
benj111
But the US benefits from global trade as much as, if not more than other
countries.

This isn't a 'tax' that will just be paid by foreign countries, it will be
passed on to US companies, it just seems incredibly short sighted.

------
beezle
I have strong feelings about spoofing - that it should not, in almost every
case, be illegal. While it is true that the spoofer may eventually cancel
their orders the fact remains: their orders were dealable by any other party
for a set period of time. You want to teach a spoofer a lesson? Deal on their
price for size.

That anyone would base a trading or investment decision on the size of the bid
or offer at any moment of time is frankly, crazy. Algos are constantly
changing(edit) price and never dealing. Brokers allow orders to be only
partially display, balances kept in 'reserve'.

There are many, many ways people attempt to "manipulate" by not showing their
hand just as their are ways that show a hand (or many hands).

------
DyslexicAtheist
I bet today EE[1] is really glad that it rebranded from "Everything
Everywhere" to EE

[1]
[https://www.crunchbase.com/organization/ee](https://www.crunchbase.com/organization/ee)

~~~
rudiv
You're downvoted, but on my mediocre desi internet LTE connection, for the ~2
seconds it took for the article blurb to load I did wonder whether it was
about the UK telco or a literal statement of everything everywhere being
securities fraud.

~~~
twic
The amount they're charging me for my mediocre anglo internet LTE connection
is _definitely_ securities fraud.

------
jmull
This probably isn't the greatest case to lament that everything is securities
fraud.

It seems fairly likely that Toshiba committed securities fraud and that if
they did, that Americans making transactions in the US were detrimentlly
affected.

It's certainly an interesting legal question. It would be nice for a
perpetrator if they could use an international jurisdictional legal loophole
to limit liability for their fraud.

But in terms of actual justice, it would be bad.

In general, you shouldn't have to directly control the mechanism by which your
fraud causes damage to be held liable for the fraud.

------
londons_explore
It's time we just made all kinds of securities fraud legal behaviour. It is
pretty much impossible to police as-is, leading to the more shady people
gaining an advantage. It doesn't hurt real people, and if it's legal, everyone
has an equal opportunity to do it.

~~~
bregma
... and besides, it's pretty much 100% prosperous white men who do it, so it's
not really a crime but a benefit to society.

------
jessaustin
Hmmm, the way to be convicted of this crime is _not_ to commit it and be
caught, because that shit ain't gonna happen. The way to be convicted is to
make a permanent record claiming you've committed the crime, and then have the
misfortune that a federal prosecutor discovers that record. What tiny
percentage of these crimes are ever prosecuted? Wouldn't we expect
prosecutors' discretion to be the only thing that could matter? Do we really
need such arbitrary and thus unjust laws?

------
vasilipupkin
unpopular opinion: I find his writing style annoying.

~~~
tanderson92
If I may add a substantive counterpoint, this newsletter's use of ValleySpeak
to talk about occasionally complex technical topics (as well as moving to
SoCal, and also reading other more focused things like:
[https://web.stanford.edu/~zwicky/aave-is-not-se-with-
mistake...](https://web.stanford.edu/~zwicky/aave-is-not-se-with-
mistakes.pdf)) taught me that my youthful naive (and possibly unknowingly
racially-tinged) ideas about language and communication were far off --
specifically that anything apart from the Correct English (TM) mode of
communicating was inferior and a sign of poor education or intellect. This is
important, because if we unjustly filter people by their dialect then we may
be making significant Type-I errors.

~~~
twic
I'm a huge fan of Matt Levine, but i'm an even bigger fan of Geoffrey K.
Pullum! Here's his proof of the undecidability of the halting problem, in
verse:

[http://www.lel.ed.ac.uk/~gpullum/loopsnoop.html](http://www.lel.ed.ac.uk/~gpullum/loopsnoop.html)

