The SEC has a few tools for catching insider traders.
1. They look at suspicious trades that made a lot of money. Putting all your money into shorting a stock, right before earnings come out qualifies. Doing it multiple times gets them very interested in you.
2. They start asking questions, conducting interviews, and getting search warrants. If nothing suspicious comes up, they drop it. Occasionally, traders get lucky, right?
3. They get wiretap warrants for their core suspects, and place a few friendly phone calls to those people, to ask a few friendly questions about some stock trades.
At this point, they have two branching options.
4.1. Tap the phone lines, and wait to see who the core suspects call.
4.2. Drop by the core supects' homes, slap some handcuffs on them, pretend to thumb through a seven-hundred page thick binder, and ask them very nicely, if they would be willing to share the names and roles of their accomplices, in exchange for a lesser prison sentence. It would also be great if they could call said accomplices, and inconspicuously get them to chat about the financial crimes that the group has been doing in the past few months. (Admitting to financial crimes over the phone makes the subsequent convictions much easier.)
Repeat, recursively, until step 3 fails to add new nodes to the graph.
1. They look at suspicious trades that made a lot of money. Putting all your money into shorting a stock, right before earnings come out qualifies. Doing it multiple times gets them very interested in you.
2. They start asking questions, conducting interviews, and getting search warrants. If nothing suspicious comes up, they drop it. Occasionally, traders get lucky, right?
3. They get wiretap warrants for their core suspects, and place a few friendly phone calls to those people, to ask a few friendly questions about some stock trades.
At this point, they have two branching options.
4.1. Tap the phone lines, and wait to see who the core suspects call.
4.2. Drop by the core supects' homes, slap some handcuffs on them, pretend to thumb through a seven-hundred page thick binder, and ask them very nicely, if they would be willing to share the names and roles of their accomplices, in exchange for a lesser prison sentence. It would also be great if they could call said accomplices, and inconspicuously get them to chat about the financial crimes that the group has been doing in the past few months. (Admitting to financial crimes over the phone makes the subsequent convictions much easier.)
Repeat, recursively, until step 3 fails to add new nodes to the graph.