It’s crazy. If one tried to steal 10k from the bank, you would go to jail. If you steal millions through illegal trade practices, you just pay a fraction of what you stole.
Its not very different from the Flash crash, in 2015 an independent trainer named Navinder Singh Sarao was sued for manipulating the market, he was creating a lot of orders and cancelling them tricking the flash trading computers to push up the prices, he made around 45 million in the process while living in his parent house. In 2020 he was convicted with a year of confinement at home, no jail time, and a trading ban.
So yeah also not the biggest punishment, but more then what these bankers got, they are still allowed to trade and no confinement.
Whether he was the only one to do it and whether he was the main cause of crash is not clear, but at least he had a part.
I personally feel like if you allow flash trading to have such an advantage over investors without those means it shouldn't be illegal to exploit it, but anyway.
One, there is no question that Sarao had nothing to do with the flash crash. The cause of the flash crash was a fund manager adding an extra zero to a trade they were making. The reason Sarao was blamed was to put pressure on him, and because the SEC needed to blame someone for there total failure to properly manage markets (the person who prosecuted the case against Sarao was the person responsible for monitoring electronic trading, she built a huge media profile through this case...no-one ever asked why the only person they charged for this was a disabled guy working out of his parent's bedroom).
Two, Sarao did go to jail in the US and the UK. This in itself was pretty unusual because he admitted to the crime, the crime had never been charged criminally, he explained to prosecutors exactly what he was doing, and he had relatively severe mental health problems which (given that he was totally compliant with prosecutors) should have meant he was never extradited (I believe he was in jail in Chicago, and he became very unwell whilst there). He was extradited to the US because prosecutors wanted to see him suffer (this is also why their first contact was a dawn raid on his parent's house), and it worked because he ended up signing a plea deal for something that he was very unlikely to actually get found guilty for (the case went on for something like 10 years).
Three, the reason why Sarao was charged was because people at HFT firms were losing money due to spoofing. That was it. The person who notified the SEC worked at an HFT firm. Ironically, Sarao himself also attempted to notify the SEC about things HFT firms were doing...nothing happened with that.
Four, people have been spoofing for decades. When markets were still a mix of open outcry and electronic, the largest traders were all spoofers. Saying that spoofing is illegal relies on the notion that once you enter an order, you must have the intention of trading at that price...do you know how to measure intention? The practice was only made illegal when the market went full electronic, and the order book data was being used by HFT firms.
Five, the reason why Sarao didn't go to jail was because the case against him made no sense. He was spoofing, spoofing is illegal but when the SEC raided him (again, highly unusual) he thought that the SEC was actually investigating his previous communications about HFT firms...it wasn't. He gave huge amounts of information to prosecutors about what large firms were doing, apparently he sat them down and went through hours of examples of market manipulation...no cases were brought as a result of this.
Sarao is the archetypal of example who was forced to serve real time at the behest of HFT firms in order to further political aims.
This. Even if someone is not convinced that this guy had nothing to do with the crash, think about the alternative. An individual, living in a parent's house with everyday equipment, can crash a trillion-dollar market in a couple of minutes. What would that say about the stability/security of that market?
The story I remember was a popular documentary which had a story arch of a single trader single breaking the market from his parents bedroom. Which is a good story but most likely just a small part of the truth; also probably why the Wikipedia just mentions him shortly.
Bloomberg had a video about this, one of their journalists wrote a book about him. The conclusion of that book was that Sarao didn't break the markets, and it was probably not necessary to throw the book at someone who was mentally disabled because some incompetent prosecutors needed a scapegoat. If you only read about Sarao within the context of the Flash crash, you will get the wrong idea.
Personally, I treat documentaries as entertainment. They can be informative, but I usually only pay attention to the finer details they provide proof for. Any kind of arch or narrative I remain skeptical on.
Even if they had exactly the same outcome, one is theft the other is simply breaking the rules.
It's a bit like killing a person using a gun and killing a person as a result of driving like the rules don't apply to you. Once it is established that you did the act, the first one undoubtedly puts you in jail for a very long time no matter who you are and the second one may get you a fine and no jail time so that no harm is made to your career(like the Qatari royal who killed a pedestrian in London).
Even though what you are saying is techically correct and the reason why things work this way I wish they didn’t. I would argue that since there was intent with the action and there were victims it should be considered a criminal case rather than just breaking the rules. The victims in this case being everyone losing money during a scheme like this.
The likeness of this towards accidently killing someone while breaking the rules for driving falls apart using this reasoning as well since in that case the intent isn’t to kill anyone. In the scenerio comparing this however to bank robbery both cases have the intent to get money.
Actually you are right, they apparently did the spoofing with the intent to deceive specific traders so that the traders take action on this false information.
The car analogy would have been accurate if they did what they did without a specific target.
Actually, this isn't necessarily true. Example regarding the college admission scandal that demonstrates that just because a dollar wasn't "stolen", something of value was.
The admissions slots were stolen from the colleges and resold on the black market. Which is a crime, for good reason. We don’t have to act like there wasn’t a legal, primary market for the admissions slots already.
I think the key is not to understand this as a crime against other applicants, or the public, or “fairness.” It’s a crime against the schools.
The back door—“institutional advancement,” i.e., giving colleges tons of money—is fine, not because it is “fair,” but because the owner of the asset gets to decide the conditions of its sale. (The fairness of the front door is debatable too, by the way.) The side door is wire fraud, not because it is “unfair”—Singer says here that it’s one-tenth the price of the back door, which kind of seems fairer—but because consultants and coaches are misappropriating the asset and selling it for their own benefit. The law doesn’t protect fairness; it protects property.
Through these spoof orders, the traders intentionally sent false signals of supply or demand designed to deceive market participants into executing against other orders they wanted filled. According to the order, in many instances, JPM traders acted with the intent to manipulate market prices and ultimately did cause artificial prices.
Theft, by definition is when someone deprives the right of property from another person. Market participants should have been buying and selling at prices determined by the market. JPM manipulated that and created a profit as a result, thereby deprived other people from their profit.
So yes this is absolutely theft, just not the physical theft you're used to seeing when a robber walks into a bank and steals cash.
> "...The law doesn’t protect fairness; it protects property."
ah, the crux of the problem. we've veered much too far in this direction, and that's why we get absurdities like corporations stealing millions being punished much less severely than individuals stealing thousands. the law should primarily be about protecting people, not property (or corporations).
This is actually not the case in quite a few countries nowadays. It Italy there is now a crime of "murder by driving" that gets automatically charged if there are victims in a car accident.
Maybe it's time to make financial-crime penalties a bit harsher.
Keep in mind that these categories are fuzzy. I Germany, a car driver was recently criminally convicted with murder after killing a pedestrian with his car.
The argument was that the way he was driving, we was accepting death. Like somebody shooting with a gun into a crowd.
A year or three ago a guy driving a pickup truck killed a pedestrian in Vernon parish, LA, made a Facebook post akin to "hope this buffs out [of my truck]" and other negative things, and wasn't charged with anything because killing pedestrians isn't illegal in Louisiana, technically. I forget if he had political ties, but I don't think he did.
There was a lesson in the new employee training on sexual harassment (for sales people, but still a general lesson) - don't bring a client to a strip club.
A higher up sales manager had actually done this in the london office and it was posted on memegen, and mentioned that this was literally in the employee manual. Lesson: be a manager.
Lesson: be a bank. The more corrupt, the better (HSBC). Until another Hitler comes along and does something about it.
So yeah also not the biggest punishment, but more then what these bankers got, they are still allowed to trade and no confinement.
Whether he was the only one to do it and whether he was the main cause of crash is not clear, but at least he had a part.
I personally feel like if you allow flash trading to have such an advantage over investors without those means it shouldn't be illegal to exploit it, but anyway.
https://en.wikipedia.org/wiki/2010_flash_crash