What's up guys and welcome back to wall street millennial on this channel, we cover everything related to stocks and investing in today's video we're going to go over a recent complaint filed by the sec charging, a greek citizen with selling insider trading information on the dark web Insider trading is one of the biggest problems in the financial markets. Insider trading makes up the majority of financial crime charges brought by the sec and the department of justice. This is partly because so many people have insider information based on where they work and partly because when people have insider trading info, it is so tempting to try a trade on it or tip off friends or family to trade on it. But insider trading can do immense harm to the financial markets.

Imagine if someone had access to pre-release earnings numbers for major us listed companies before the earnings were officially released or if someone had access to big market moving trades, that a hedge fund or other big institutional money manager was planning on making before they actually submitted the Trades they could front run those events buying up stock before a bullish, earnings, release or before a big buy order by a hedge fund, or they could sell a stock before an earnings miss or before a big sell order. By doing so, they unfairly take profits at the expense of other market participants. Active trading is a zero or negative sum gain. Whenever shares trade hands, essentially no wealth or value is created.

In fact, a small amount of wealth is destroyed due to infrastructure costs and transaction expenses. So when a trader uses insider information to make millions on the stock market, all of those profits are coming out of someone else's pockets. That makes it arguably no different than stealing. On december 5th 2016, the greek citizen named apostles travis joined a marketplace on the dark web called alpha bay.

Alpha bay was a marketplace that operated on the tor network, which was the largest such network. This part of the internet is made up of multiple overlay networks that basically allow users to communicate with each other anonymously and securely they route internet interactions through multiple locations before reaching their ultimate goals at each location, adding or removing encryption in such a way. That is very difficult to both pinpoint the origin of the request and view the content of the message. These networks are only accessible using very specialized software.

The tor network is the largest such network and is used to facilitate virtually all illegal activities that you can think of multinational drug dealing, identity theft and other types of crime that normal people would rather not think about on this part of the internet. Bitcoin is the primary medium of exchange for illegal goods and when apostles travis joined the alphabet marketplace, he used the alias the bull. He posted listings like this one under the fraud category advertising a service as quo hedge fund, insider stock trading tips. Unquote he charged about 30 per single insider tip payable by bitcoin on the listing.

He said that the tips come from an employee of a trading branch within some sort of securities trading company. By buying the tip, he promised that buyers could benefit from knowing what big market participants are buying and selling. He also offered monthly and weekly plans for 300 and 100 respectively, whereby buyers could get multiple tips throughout the length of the plans. Here's a tip that i sent to one undercover irs agent, posing as a buyer.

In the early morning before the market opened on june 16 2017. He suggested selling the stock of ptc therapeutics when the market opens that same day, the confidence level of the tip was pegged at 8 out of 10 suggesting high confidence throughout the next several days. Undercover agents observed trevia suggesting numerous other insider tips, some to buy and some to sell. For example, on june 27 2017 he told his customers to sell short shares of buy on vax pharmaceuticals when the market opened sure enough.

The stock fell significantly that day down more than two percent by the time the market closed over the course of that day, the stock was never up more than half a percent and at its lowest point, was down more than three and a half percent from the Open if his customers had followed his instructions on this trade and sold short at the open and then had covered the short position at the close, they would have made a lot of money after the first six months of selling. This and similar insider stock tips travis had received 100 positive ratings on the alphabet market. In june of 2017, the fbi seized computer servers operating alpha bay and arrested its operator. A 25-year-old canadian citizen living in thailand after alphabay was shut down.

Travis moved his entire stock tip business to an alternative marketplace called dream market like alphabay dream, market offered, goods and services, including drugs and fraud. For two years he sold his tips on dream market before it too was closed down. After it closed, travis moved to multiple other networks, including nightmare market and asap market, always using the alias the bull during the entire time. Both the fbi and the irs solicited travis's tips through undercover agents.

Gradually travis came to trust these customers and began sending them unsolicited tips beyond the hedge fund, insider trade tips. On august 1st 2017 he sent an undercover irs agent, an unreleased earnings report for the major american biotech company. Illumina illumina is an advanced corporation with a nearly 70 billion market cap. It's a large corporation whose earnings are closely followed by wall street.

On august 1 2017. He sent the irs agent, this tip, containing the unreleased earnings numbers for the company's second quarter. 2017 financial results. The results were not to be released until the market closed.

That day he predicted that illumina would release earnings of 82 cents per diluted, share total revenue of 662 million dollars in full year guidance of 5.36 cents to 46 cents of gap, earnings per share. He also predicted illumina's non-gaap earnings outlook to be announced as 3.60 to 70 cents. A share shockingly all of those numbers were exactly right. Illumina announced the exact same 82 cents of net income per diluted, share 662 million dollars of total revenue and guidance for 12 revenue growth gap, earnings of 5.36 to 46 cents in non-gaap earnings of 3.60 to 70 cents per diluted share.

These earnings were obviously very bullish, indicating beats on almost all fronts. The next trading day, the stock opened up about nine percent already and finished the day of fourteen point, eight percent from the previous close anyone who had received travis's pre-release earnings could have benefited massively from this information. After this successful insider earnings release provided by trevias, he tried to sell undercover agents further pre-release earnings for other companies as well. He charged five thousand dollars for one particular pre-release report on a company called analogic sold to an agent.

The tip took the same format as the illumina tip, with numbers for total revenue and net income for the quarter and full year. The most concerning aspect of travis's tips was that they must have come from multiple insider sources from within different companies. He had access to insider information from a securities trader as to what trades they were going to make, as well as confidential financial results from a company as big as illumina, among others. That means that it could not have been just one or two people.

It has to have been a network of insiders all in on the operation and travis wanted to expand it further. In 2020, he discussed with undercover fbi agents a plan to develop an anonymous website for the purpose of brokering the exchange of insider information for use in trading. He asked the undercover agents to assist with the building of the website where he would recruit insiders to provide material, non-public information. The website would act as an escrow agent for the transactions.

As the plan came along and the agents gained the trust of trevis, he suggested an in-person meeting with the undercover agents in august of 2020. They agreed to meet in person to discuss the development of the website and so ended the three-year campaign to capture the insider information dealer. Over the course of the investigation agents received hundreds of insider trading tips from trevias. Some of them turned out to be unprofitable trades, but others turned out to be spot on, for example, in this tip travaya suggested to buy shares of daio after the market opened on february 20th.

2020. that same day, daio closed 6.5 percent higher on july 9th 2021. The sec charged travis with violating anti-fraud provisions of federal securities laws. It ordered him to pay back all of his illegally earned profits from his years of operating the scheme, as well as pay civil penalties.

According to the sec's press release he sold over 100 subscriptions over the course of his scheme. In addition, the department of justice issued a parallel indictment against travis charging him with securities fraud and money laundering. The maximum sentences for those charges are 25 and 20 years respectively. The actual sentence he receives will be determined by a judge he'll be prosecuted by the u.s attorney's office's securities and commodities fraud task force, alright, guys that wraps it up for this video.

What do you think about apostles, travis's insider trading scheme? How harmful to society do you think it was? Let us know what you think in the comments section below if you enjoyed this content, make sure to like this video and subscribe. So you don't miss future uploads as always. Thank you so much for watching and we'll see you in the next video wall street millennial, signing out.