I have no answers.
-Frustrated consumer protection attorney
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.
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.
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).
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.
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.
https://www.bloomberg.com/opinion/articles/2019-03-13/you-ha...
https://twitter.com/jbarro/status/1105506383770894336
In the JPM fraud case specifically: (FTA)
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.
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).
Maybe it's time to make financial-crime penalties a bit harsher.
The argument was that the way he was driving, we was accepting death. Like somebody shooting with a gun into a crowd.
https://www.lto.de/recht/nachrichten/n/lg-berlin-529ks6-20-k...
Can we call it "shooting like rules don't apply to you"?
"one is theft the other is simply breaking the rules"
The other is fraud, also a crime.
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.
Perhaps the government is lying about this, but at that point, you're just believing a conspiracy.
A cursor search shows that the fine is less than 10% of their last quarter NET income of 12.1 billion.
I would certainly keep doing illegal things if my only penalty was a simple fine like that every 10 years.
The fine was levied against the entire company, not just their trading subsidiary.
>settling charges against JPMorgan Chase & Company (JPMC & Co.) and its subsidiaries, JPMorgan Chase Bank, N.A., and J.P. Morgan Securities LLC (JPMS) (collectively, JPM)
Why should you? Suppose you did a bad. Let's it was a side hustle where you took refurbished ipads and resold them as brand-new ipads. Over the past year you made $2000 in profit from doing so. The cops caught you doing it and fined you $10k. That sounds like a pretty serious penalty. However, you're also a bay area software engineer making $400k total comp, so $10k is a drop in the bucket. Should they fine you $200k instead, just because you happen to be a software engineer?
Yes, the fines should be punitive, not proportional to the damage.
It's hard to not feel shocked when seeing numbers in the billions but you can't forget they are often accompanied by an equally shocking denominator.
Unless you are implying that JPM profited more than $172 million, the report suggests the government took the profits.
The fine should be ALL of the ill-gotten gains and then a naughty boy fine on top of it. To do otherwise means that you did not do justice.
Reputational losses are also a thing, agencies and whistleblowers will be paying a lot more attention to this sort of thing from JPMorgan from now on. Maybe a lesser effect would be morally conscious people (in finance haha) choosing not to work there.
Of course it is also possible that Chase PR machine greases the right hands to negate all of the downsides, and then you have a point that current political/regulatory climate is allowing this is be a profitable business model.
Jail time however, is not something everyone will want to gamble on.
So, it should be what you said + jail.
Better ways is to launder your ill gotten gains through property, let a few more respectable people take a slice of the cake like lawyers, property surveyors, etc etc and then it all becomes good until you become a political pawn.
Edit.
I should add, even when "entrapped" by the FBI with a few $million of coke and its recorded on hidden camera's you can still get off if you have been useful to the country or a few country's, in this case playing a part in reducing the troubles in Northern Island.
Let me introduce. https://en.wikipedia.org/wiki/John_DeLorean https://www.youtube.com/watch?v=edsAIPfw_dE And then Hollywood had their own idea's https://www.youtube.com/watch?v=Psxktpxkc6o
It seems the FBI were not the brightest, considering how geopolitics works, or are they mere attack dogs?
The DeLorean is 40 years old now!
I work in the industry and follow things like this and I haven't heard the US government saying they would like to charge JPM but they can't due to destabilizing the US financial system.
I'll even let you go back 5 years to find such a quote!! I don't think i've heard of this happening.
> That sentiment was echoed as late as 2012 by Lanny Breuer, then the head of the Justice Department’s criminal division, who said in a speech at the New York City Bar Association that he felt it was his duty to consider the health of the company, the industry, and the markets in deciding whether or not to file charges.
https://www.theatlantic.com/magazine/archive/2015/09/how-wal...
And here is the 1999 memo from (then Deputy Attorney General) Eric Holder [2 PDF].
[1] https://www.justice.gov/opa/speech/assistant-attorney-genera...
[2] https://www.justice.gov/sites/default/files/criminal-fraud/l...
Please don't include stuff like this in your comments. It degrades HN, and does not "assume good faith", as the HN guidelines ask you to do (https://news.ycombinator.com/newsguidelines.html). The commenter could be uninformed, or have genuinely thought that their quote backed up their position (and just been wrong).
Saying that you're "being trolled by an anonymous account" is bad form and definitely not the kind of stuff that I want to see on HN.
What does "ten years ago" have to do with it? The original claim said nothing about when it was said; you're the only one who brought that up.
The Holder doctrine, (as explained in the article that was provided as a source) dates from 1999 and is thus over two decades old. This doctrine was referenced in 2012 by the head of the Justice Department’s criminal division.
If you believe this doctrine is no longer followed, it would behoove you to provide evidence of your own that "too big to jail" hasn't been a guiding doctrine for over two decades.
> I can see why you chose to create a throw away account in this case to comment. I now see i'm being trolled by an anonymous account :( I'm sorry I feel for it.
Calling someone a troll never improves any discussion and is inappropriate on HN.
> That sentiment was echoed as late as 2012 by Lanny Breuer, then the head of the Justice Department’s criminal division, who said in a speech at the New York City Bar Association that he felt it was his duty to consider the health of the company, the industry, and the markets in deciding whether or not to file charges.
https://www.theatlantic.com/magazine/archive/2015/09/how-wal...
It’s already a big problem that politics attracts more and more crazy people and reasonable people are staying away.
No, Mr McDonald, it's quite the opposite. The important message is that if your organization can keep the profits from criminal activities higher than the penalties, they can perpetuate it. That's because there are virtually no other consequences for any individual criminals personally responsible for this, and none of them was persecuted, punished and forced to give up his ill-gotten gains.