{"id":554,"date":"2021-08-30T00:00:00","date_gmt":"2021-08-30T00:00:00","guid":{"rendered":"https:\/\/norrismclaughlin.com\/bwob\/2021\/08\/30\/insider-trading-tips-dark-web-the-bull\/"},"modified":"2022-12-20T09:28:51","modified_gmt":"2022-12-20T09:28:51","slug":"insider-trading-tips-dark-web-the-bull","status":"publish","type":"post","link":"https:\/\/norrismclaughlin.com\/bwob\/cyber-security-and-data-protection\/insider-trading-tips-dark-web-the-bull\/","title":{"rendered":"Insider Tips: And That IS \u201cBull\u201d"},"content":{"rendered":"
On Friday, July 9, 2021, the\u00a0U.S. Securities and Exchange Commission (\u201cSEC\u201d)<\/a>\u00a0charged Apostolos Trovias, a Greek national, with selling (from 2016 until early in 2021) what he termed \u201cinsider trading tips,\u201d including prerelease earnings reports, on the Dark Web. Trovias, according to the SEC Complaint, operated using the \u201cpseudonymous avatar \u2018The Bull\u2019.\u201d Trovias, whose last known address was in Greece, is, again according to the Complaint, 30 years old. Nonetheless, throughout his activities on the Dark Web, he insisted that he was located in the United States.Trovias offered for sale trading information, which he claimed he obtained from an employee of a major stock trading firm. He also offered for sale revenue and earnings reports for public companies, before those reports were officially released. In two examples of the latter, the numbers sold by The Bull were essentially accurate (one example had a wrong label on the number), but the Complaint does not assert how Trovias obtained those reports. Further, Trovias sought to enlist help from some of his customers to set up a website specifically to share inside information, and began building it with the aid of a third party.<\/p>\n

Securities Fraud and Money Laundering<\/strong><\/h2>\n

In addition to the SEC lawsuit, on the same day, July 9, 2021, the U.S. Attorney for the Southern District of New York filed a Grand Jury Indictment against Trovias for Securities Fraud and Money Laundering. The SEC, in its Press Release concerning the case brought against Trovias, specifically notes with appreciation the assistance of the U.S. Attorney for the Southern District of New York, the\u00a0Federal Bureau of Investigation<\/a>, and the\u00a0Internal Revenue Service<\/a>. More about the FBI and the IRS later.<\/p>\n

Trovias offered different payment options. A single tip could be purchased at the \u201cpromotional price\u201d of $29.95. Or a person could subscribe on a weekly plan for $99.95, or a monthly plan for $299. Pre-release earnings reports sold for $5000 each. All payments had to be made in bitcoin. The Complaint states that the Dark Web \u201cis a part of the internet that requires specially designed software to access and is specifically designed to facilitate anonymity by obscuring users\u2019 identities, including by hiding users\u2019 internet protocol addresses.\u201d The Complaint further states that \u201cthe most prominent dark web is The Onion Report (\u201cTor\u201d) network.\u201d<\/p>\n

The Indictment provides greater detail about the Dark Web. \u201cThe Dark Web refers to websites that are not indexed by conventional search engines and to which access may be restricted to those using specific anonymizing browsers or computer settings.\u201d The Indictment asserts that Trovias used \u201conline marketplaces [on the Dark Web] that enabled users to buy and sell illegal goods, including controlled substances, stolen and fraudulent identification documents and access devices, counterfeit goods, malware and other computer hacking tools, firearms, and toxic chemicals;\u201d and in some cases, illegal services, such as insider tips and money laundering.<\/p>\n

The Dark Web<\/strong><\/h2>\n

We have written before about the use of the Dark Web in securities fraud, see our March 30, 2021, blog post, \u201cUnder the Cover of Darkness: Insider Trading and the Dark Web<\/a>.\u201d<\/p>\n

When the average person thinks of the internet, their reference point is the Surface Web, which is indexed by conventional search engines like Google or Bing. However, the Surface Web, which most of us use every day, is less than 5% of the internet. Any activity in which you engage on the Surface Web can be \u2013 and most likely is \u2013 being tracked. Shopping for a tent and being indecisive regarding your purchase? It\u2019s amazing how tent advertisements keep popping up while you are browsing.<\/p>\n

Below the Surface Net, where daily legitimate personal and business interactions are conducted, lies the Deep Web, which sounds ominous but is really just the internet location for protected information such as medical records, bank accounts, government databases, and private emails, to name a few. Usually, without passwords or authorization, a person cannot access information stored on the Deep Web. The Deep Web accounts for approximately 96% of the internet. And it is within a small section of the Deep Web that the Dark Web exists.<\/p>\n

The Dark Web is an intentionally hidden area of the internet \u2013 a dangerous neighborhood known for illegal activity and unsavory characters, where a person can buy and sell anything with total anonymity. Forget about using Google or Chrome to access this neighborhood \u2013 you need special software to gain access to the confines of this protected and uncensored space.<\/p>\n

Ironically, the United States Government created the most commonly used software, known as Tor (\u201cThe Onion Router\u201d), and released it to the public for free in 2004. Tor uses multiple layers of encryption (like an onion) to transmit information through indirect means to the ultimate destination, thereby preserving anonymity.<\/p>\n

So the Complaint asserts that \u201cDue to its dominant market share, the Tor network is home to the bulk of the Dark Web marketplaces.\u201d<\/p>\n

Insider Trading Tips<\/strong><\/h2>\n

So, how then did the SEC and the U.S. Attorney happen onto the nefarious operations of this Greek interloper on the Dark Web? The first \u201cmistake\u201d occurred in June 2017, when Trovias sold a one-week plan to an undercover IRS agent on a Tor website. He subsequently sold him a monthly plan and requested that the IRS agent confirm that he was in the U.S. In correspondence with the IRS agent, Trovias confirmed that he was operating in the U.S. and obtained reports from his customer that the information was profitable. In April of 2018, a user of one of the Tor websites contacted Trovias about his posts to the website. That user was an undercover FBI agent. Trovias offered a monthly plan for $320, and the agent transferred that amount in bitcoin.<\/p>\n

On May 1, 2018, Trovias began sending the agent daily insider tips, claiming that the information came from \u201cmoney managers and a market maker.\u201d The Complaint asserts that this statement was either false and misleading (because invented by Trovias) OR a violation of the law because Trovias knew that the statements were a violation of a duty of trust and confidence for personal benefit. The Complaint alleges that Trovias \u201cprovided tips to buy or sell particular stocks directly to the IRS Agent and the FBI Agent\u201d from June 16, 2017, through at least March 6, 2020. Trovias essentially admitted his misdoing when he wrote to the FBI Agent on 18 May 2018 that his source \u201cis really cautious of the information leaking to a lot of people.\u201d<\/p>\n

Over and apart from selling inside information to customers, Trovias publicly acknowledged to some of his customers that he was \u201cworking with quite a few people\u201d to trade on their behalf in return for a percentage of the profits. He also wrote to the FBI agent on October 14, 2018, concerning some of his insider tips to say that he, Trovias, had traded in the shares of the same company about which he had tipped the agent four days earlier. Not content with his subscription receipts, he decided to participate in the market opportunities that his \u201cinside information\u201d presented.<\/p>\n

Insider Tips on the Dark Web<\/strong><\/h2>\n

The Complaint seeks a permanent injunction of Trovias\u2019 activities and disgorgement of all his ill-gotten gains. The Indictment seeks conviction of the cited criminal offenses (one expects with incarceration) and forfeiture of all gains from his illegal activities. However, as the location of Trovias is not known (see the Complaint, last known address was in Greece), and he may be beyond the jurisdictional reach of U.S. law enforcement, the outcome for Trovias is uncertain. Even more troubling is the related apparent inability to determine the truth of Trovias\u2019 claims as to the sources of the information he sold. If his claims as to how he received the trading information and his unexplained ability to obtain earnings releases BEFORE their release are not answered, the serious questions about the integrity of our capital markets will remain unaddressed.<\/p>\n

When one is offered secret information for a price, one must ask what that says about the offeror, the offeree, and most of all, the marketplace. Here the answers remain shrouded in the blackness of the Dark Web.<\/p>\n

If you have any questions about this post or any other related\u00a0securities<\/a>\u00a0or general\u00a0business law<\/a>\u00a0matters, please feel free to contact us at\u00a0pdhutcheon@norris-law.com<\/a>\u00a0or\u00a0rwarren@norris-law.com<\/a>.<\/p>\n<\/section>\n","protected":false},"excerpt":{"rendered":"

On Friday, July 9, 2021, the\u00a0U.S. Securities and Exchange Commission (\u201cSEC\u201d)\u00a0charged Apostolos Trovias, a Greek national, with selling (from 2016 until early in 2021) what he termed \u201cinsider trading tips,\u201d including prerelease earnings reports, on the Dark Web. Trovias, according to the SEC Complaint, operated using the \u201cpseudonymous avatar \u2018The Bull\u2019.\u201d Trovias, whose last known […]<\/p>\n","protected":false},"author":99,"featured_media":573,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[71,156],"tags":[72,56,159],"coauthors":[],"acf":[],"yoast_head":"\nInsider Tips: And That IS \u201cBull\u201d - Business Without Borders\u00ae<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/norrismclaughlin.com\/bwob\/cyber-security-and-data-protection\/insider-trading-tips-dark-web-the-bull\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Insider Tips: And That IS \u201cBull\u201d\" \/>\n<meta property=\"og:description\" content=\"On Friday, July 9, 2021, the\u00a0U.S. Securities and Exchange Commission (\u201cSEC\u201d)\u00a0charged Apostolos Trovias, a Greek national, with selling (from 2016 until early in 2021) what he termed \u201cinsider trading tips,\u201d including prerelease earnings reports, on the Dark Web. 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