Hey there I’m James for Kalkine Media and in this video I’ll take you through insider trading
and some of the most scandalous instances of the crime – just before I do, you can subscribe to the
channel for more content and press the bell icon. Insider trading happens when investors get a
hold of information or data of a publicly listed company that is yet to be made public to sell and
purchase the securities. However, accusing someone without any substantial proof can be murky.
Sometimes investors with good analysing skills and on-the-ground research can also mint money.
But if the investor gets hot tips from someone inside the company,
it can be a clear case of insider trading and that person can end up in jail.
Media personality Martha Stewart was involved in an insider trading incident in 2001 for example.
Stewart sold 4,000 shares of biopharmaceutical company ImClone Systems using a piece of
information from a broker. The United States Food and Drug Administration denied the company's
cancer drug review, and the share price fell once the news was released. While many investors lost
heavily, the family and friends of the CEO of the company were unscathed. The government agency,
U.S. Securities and Exchange Commission later found that the numerous executives
had sold their stock based on the instructions of a share broker. Stewart also got her hands
on the information and sold a vast number of shares and was later caught and convicted.
Such trading is illegal and is closely monitored by regulators in different countries. Another
recent infamous case of insider trading comes from Australia. At the age of 24, Lukas Kamay became
one of the most successful traders in Australia. He turned AU$1.5 million into AU$2.54 million
within 25-minutes, trading from a toilet cubicle. Lukas Kamay had a great job at National Australia
Bank in Melbourne and a salary of approximately AU$200,000 per year. However, it all came crashing
down in an AU$7 million insider trading case, emerging as one of the biggest ever insider
trading cases in recent times. Kamay was sharing inside information with his university friend
Christopher Hill from his NAB office – an action that ultimately landed both of them in jail.
An insider of the company trading in publicly available information is a legal side of insider
trading. In 2020, Kodak's share price surged drastically and left the market amazed. However,
the hike was short-lived. The media reported that Kodak's top employees were offered stock
options the day before the loan announcement. Following this, the company announced that the
loan application to fund Kodak Pharmaceuticals was "currently on hold", but the company denied
any wrongdoing. The case is still wide open, and the financial world awaits its results.
Sometimes, the information is not intentionally leaked but reaches a specific group who may
benefit from the news. For example, another case involving a columnist for The Wall Street Journal.
R. Foster Winans, who wrote a weekly article called "Heard on the Street."
As an outsider but still a media person, he was in contact with the traders and the financial
world. He teamed up with a broker and would write about stocks in his column
whose prices would then go up or down. Knowing the information about the stocks in advance,
the broker traded before America read and talked about it. The broker shared the profit with Winans
for his intelligence, but later they were caught by the U.S. Securities and Exchange Commission.
Even though the column was the personal opinion of Winans, the material was legally deemed the
property of The Wall Street Journal – and for that matter was deemed insider trading.
Many have tried to profit from advanced knowledge of securities, but it’s an extremely dangerous
game with severe risks if caught – so rather than organise a funnel of illicit information
you’d be better off subscribing to kalkine and pressing that bell icon
so we can keep you informed in a way that probably won’t result in
you going to jail. I’m james reporting for
kalkine! you