Let's do Mark Cuban

(It all started as all good things start these days : on irc. Of course.)

Earlier this year, Mark Cuban, who is both rich and in trouble with his governmentⁱ wrote an article about his adventures with the SEC. Let's quote :

My understanding of insider trading law is that in order for it to be insider trading, there must be some violation of trust. In other words, if someone walked up to you and said “Im the CEO of this public company and I’m about to make the biggest cash sale in the history of the company and we will blow away all wall street numbers and you should buy the stock”. That is without question material, non-public information. But if you trade on the information, is it insider trading ? The answer as best I understand the law is NO. It is not insider trading. Why ? Because the CEO did not ask you to keep the information confidential. Nor did he ask you not to trade on the information. You have no responsibility to him. You can trade and tell the world about his deal if you would like.

This is wildly inaccurate, if very self serving. The proposition misstates conspiracy in the terms of overt conspiracy, perhaps trying to take advantage of a perceived intellectual simpleness of the online dweller. The fact of the matter is that you don't have to have overt conspiracy to have conspiracy, nor could this ever be the case, as "unfair" the "people themselves" may consider this situation. If it's unfair or not is immaterial, and in no case the fault of the courts or the legal system generally (as inept as those both may be). Consider just for a moment what would happen if conspiracy was reduced to overt conspiracy : no mob boss ever could be prosecuted for murder, just as long as the underling actually doing the murder simply "proposed" the murder to him. No corporate officer could ever be prosecuted for fraud, just as long as the poor accountants actually engaged in the fraud "came up with" the stuff "on their own". He could even set up a foundation for their kids college education (at Harvard) out of the kindness of his heart towards the offspring of a fellow citizen fallen on hard times.

In short : if conspiracy were to be redefined strictly as overt conspiracy, there'd be no further need of any other police personnel than traffic cops and perhaps some coroners to count the occasional bodies. And even should such a nonsensical step be taken by the entire legal system, somehow, it still wouldn't matter, because I still wouldn't do it. Because it's patent nonsense, that's why.

Obviously the alternative is complicated, because anything and everything can signify, and there's no objective significance so therefore all acts that put meaning into words will have to be subjective, and open to subjective interpretation. This should be ok, in a working legal system, in a working society (either of which the United States most emphatically is not, nor has been in a long while), as a sensible and predictable consensus should emerge, guiding everyone over time.

So, there's plenty of space to discuss what does or does not, did or did not constitute covert conspiracy in any one case, and on the basis of such subtle arguments Mr. Cuban's lawyers are currently prevailing in the courts. But it is both fraudulent and insulting to misrepresent all that complexity in terms of simple, cut and dried nonsense. I see why it'd be appealing to the redditards, and to the wikitards, and to all the other tards. The point, and it can't be understated, this point, is that online the tards don't matter. Yes, even if they're many, very many, incredibly many. Those are meatspace considerations, online they're as irrelevant as AIDS on Mars.

This is a point confused rich people would do well to get through their richly thick skulls. I didn't come to be the richest guy you knowⁱⁱ through luck, or accident, or Obamacare. I came to be the richest guy you know through a methodical implementation of that very principle. Moving on :

In any event, I bring this up because NO ONE truly understands what is legal and what is not legal when it comes to insider trading.

This is true. If anyone claims the contrary he is both a fraud and a liar, and please indicate his name to me in the comment section so I may say both those things to his face.

This SEC has made the conscious decision (a huge mistake IMHO) to regulate through litigation.

It may be a mistake, but it was a mistake worth making in the case of putzes a la Martha Stewart. While it's true that some people were outraged at the nonsense, and while it's true that her conviction marked the moment when consensus was reached that the US is to be abandonedⁱⁱⁱ, nevertheless it is also true that her imprisonment satisfied a deep urge within the unwashed masses, those people who do not matter and consequently should not count. Later ticklings of that same fancy (say Devyani Khobragade for a recent example of the principle) simply flow from the original premise : the scum loves nothing more than to see an out of control state mistreat the elites. Which is why the scum perishes, in all times and places, under its own weight. But that's a subject for another day - each and every other day, in fact.

In other words, they love the confusion around insider trading laws. They realize that when you combine this legal confusion with the authority and unlimited resources of the SEC, it is incredibly easy for them to bully and intimidate individuals and companies into settling their cases. Which in turn creates the box scores that SEC attorneys use to get their next job. Of course none of this helps protect the markets or improves investor confidence in the markets or improves capital formation , but no one at the SEC seems to really care about these issues.

This would be amply true. Obviously, this exact "strength" belies the equivalent weakness : all it takes is a few good men. All it takes is a few good men, and the entire echafaudage falls over^iv. But let's move on :

In this case, SEC vs Schvacho, the SEC has no facts on their side. Not a single one. The judge says so and the SEC agrees. What the SEC is trying to do, and again I caution that I am not a lawyer, is expand the definition of what constitutes a duty of trust under SEC 10b5-2. In the crazy , convoluted world of the SEC , where adding confusion to insider trading laws is a good thing, in this case they want to be able to say that if you talk to a friend who works at a company and buy stock in that company, even if both parties say you never discussed business and both parties say under oath that no material, non public information was discussed, delivered or received, that both parties must be lying.

This is actually a distortion of the case, but not nearly as gross as you'd imagine. In point of fact the SEC does tend to argue something to this effect, perhaps more aptly rendered as "if you talk to a friend who works at a company and buy stock in that company, even if both parties say you never discussed business and both parties say under oath that no material , non public information was discussed, delivered or received, that it is the discretion of the SEC to believe them or not".

Which proposition may even seem credible on the face, after all why not, right ? The SEC is a bureaucracy, Cuban and that other guy are just men, so why shouldn't the bureaucracy know better than men do ? It knew in the case of smoking, and that's "simple", right ? It knew in the case of "global warming", and even if it was wrong... at least it was not a man that was wrong, so it's okay. Because that's the one worst thing that can happen under Earth's yellow Sun : that a man be wrong, even a little. Let a bureaucracy be wrong a lot, that's no big deal, nobody thought "hey, the Presidency is stupid, maybe it should be dissolved" when Bush stepped in it with the WMDs.^v You don't even have a word to describe what should happen to a failed bureaucracy, talk about using words for mind control. But moving on :

Then the judge had to explain how Federal Rules worked in his courtroom (Page 22/Line 24)

This is particularly brilliant, because I have scarcely set eyes on less competent legal minds than what the SEC seems to be employing. Some woman alleging to be a "Senior Attorney", whatever that may mean^vi, actually signed and stamped materially false declarations. Think of the humiliation the SEC must feel (and would feel, were it a man rather than a bureaucracy) at the notion that their first communication to me contained materially false information delivered under oath. Think of the fact that this should be, and in any civilised country actually is actionable before the court : they tried to defraud me. Think of the still more amusing fact that even if we leave the substance aside, the bureaucracy failed to even pass form : there's such a thing as Section 508 mandated accessibility compliance. They did not comply. This, again, is actionable, not only in any civilised country, but even in the US.

This is a trend. These bureaucrats, tho they may be ambitious, tho they may feel empowered, are nevertheless poorly educated and intellectually slow. They are not the sort to represent justice, especially not in complex matters : they lack both the ability and - more importantly - they lack the moral standards to understand why they should even try.

The Mary Joe White needs to start firing people.

THE COURT: How about the Manpower CFO’s?

And I will tell you, Mr. Kim, one more time you walk up and whisper something, I am going to nail you to your chair.

MR. KIM: My apology, Your Honor. I should have asked for permission.

MR. MAYES: I’m sorry?
THE COURT: That’s what happens, because he’s not listening to my question, he’s listening to you whispering in his ear. Did anybody ever go to the Manpower CFO and ask him what time the call was or get his phone records?

This is what judges have to put up with. We're a couple of years past the scandalous, read any transcript where the bureaucracy represents itself before the courts and see just how inept, just how gluttonously blind and disinterested in anything outside its gullet and the feeding thereof it is. And under its pressure, under the pressure of so many young and ambitious, stupid and uneducated "lawyers", the judgeship is slowly crumbling. You already have more magistrates than there are people who can read and write in some states, the entire situation is an unbound system moving towards the Soviet solutions to very similar problems.

The alternatives on the table are either massive deregulation (and by massive I mean, that the totality of all laws and regulations should fit within one tome) or else the NKVD troika revived.

For my curiosity... what's your money on ?

1. You know how that works, exactly as described in the Stage n: Bitcoin exists article : what makes one terrorist or freedom fighter, and why could one have problems ? [↩]
2. If it is perhaps the case Cuban is yet ahead in fiat terms (a proposition that becomes more improbable each passing quarter, because, as Obama would say, if you made two billion you didn't make that two billion), it is certainly the case that this disparity won't last. Bitcoin. [↩]
3. 2001 made it clear to the entire ruling class that the US has a serious problem. There raged a debate for a few years if the place is to be fixed or abandoned. 2004 settled that debate. [↩]
4. To quote the prostitution article,

   It is inconceivable however that a DA would greenlight a case on such flimsy evidence, at least for another decade or so. This because the little known secret about commissars, be they in the old Soviet republic or in the current one, is that failure hurts them a helluvalot more than success helps. So, one single case lost before the jury scares our friendly asshole DA a lot more than the possibility of winning entices him.

   It's true that your usual financier and other assorted pencilnecks are rarely possessed of half the ballsack your cowardliest prostitute packs, and so the SEC has perhaps the easiest job in this line. Nevertheless, systems evolve, and for each pencil neck snapped through this process, a stronger neck shall be the replacement. Eventually you start having to prosecute by the criterion of how much of a pussy the defendant is, rather than by how good your evidence. This is where we are now, and it means that you shall be run by the brave, not the just. Which is why ye scum of numerous social media accounts and clicks and likes should pray every day in the morning and in the evening that I deign to take over your shithole that once was a garden. Because if I won't be the one to whip your bare asses and push your faces in the mud under my boot, someone else will. And that someone else likely won't have much interest in poetry nor any taste for art. They may be just as brave, they won't be just as wise.

   That's right, that's the choice left on the table. Funny how "a government of laws, not men" works out once there's no more men, wouldn't you say. [↩]

5. Why shouldn't this be how it works ? The first time a US President lies, the office of the US President is abolished. Permanently. Why not ?

   Why should the owner, let me reiterate, the owner of a sports club be banned from the sport for saying nigger ? That is no lie. Why should the Presidency still exist, after the holder lied ? Obviously further holders will further lie, and they're no owners of it. Take it away, abolish it, adios. [↩]

6. And it'd seem dubious it means too much, seeing how her entire job seemed to be what Indian call center girls do, ie try to get the cold call to commit to a phone call. [↩]