Hacker News Reader

Comment by kube-system | Hacker News Reader

I suspect that if you knew about the scheme, and executed trades as a result of that knowledge, you would probably run afoul of this?:

https://www.law.cornell.edu/uscode/text/18/1348

View on HN

No, you wouldn't be executing the fraud.

Reading the statute that way would make companies like https://en.wikipedia.org/wiki/Hindenburg_Research illegal.

Matt Levine said it best: "Everything everywhere is securities fraud."

https://www.bloomberg.com/opinion/articles/2019-06-26/everyt...

You can’t take it literally in this sense. Among other things, investors cannot commit securities fraud, only executives can. Als, relatedly, Matt Levine’s take regarding insider trading may be relevant here.

> investors cannot commit securities fraud, only executives can.

The very story you're commenting on is an example of a securities fraud scheme (pump and dump) that can be committed by investors.

This definitely isn't true. Anyone lying to you in connection with a sale of securities in return for financial gain is committing securities fraud. According to any reasonable reading of the statute books, or any of hundreds of insider trading cases that do not involve executives.

Ah, fair enough. I guess it would come down to the particular circumstance in which you were made aware?, i.e: https://www.law.cornell.edu/uscode/text/18/371

Either way, I wouldn't be comfortable touching either situation with a 20 foot pole.

> Either way, I wouldn't be comfortable touching either situation with a 20 foot pole.

This is the right call, I think.

They make the alleged fraud public though, do they not? The comment you’re replying to seems to suggest a strategy of intentional non-disclosure. I think that’s a material difference when it comes to analyzing the legality of those two approaches.

They take a short position before going public, to profit off the drop.

You're not going to be able to short random OTC stocks. While it's technically possible, there isn't going to be a market providing shares for these podunk fraudulent issues.

Reply on news.ycombinator.com