A Whole New Meaning To Playing The Man

On a rude investment strategy, NDAs, and Passi's pissy son

The World's Most Reliable Investment Strategy 

All of my Wall Street Bets folks are gonna love this one. 

Buy stock, the stock goes up, sell stock. That sounds pretty reliable to me. The tricky part is finding the stock that will increase in value. After this past week, it's only fitting to talk about this. 

If you work at a hedge fund or trading desk, you were probably hired because you know how to find the stocks that go up. You get paid a salary and equity, and like free reign in the strip club, and in return, you make the company a ton of money. Good deal!

But there are other ways to monetise your skill. Some people start their own funds and take the bulk of the profits, and others sell investment advice on a course or something (you should buy those, super reliable stuff).

A separate skill, but equally as practical, is sitting on your ass waiting for Nancy Pelosi or some politician to buy a new stock. Her insider knowledge is valuable, and she trades on that knowledge, so her trades are valuable. It's a tried-and-tested theory. She netted me 6% ($12…) before I took my profits. 

The other way to make money trading is to find the stocks that will go down. I've discussed a unique fund called Hunterbrook, which has its own investigative journalism team and shorts stocks based on its findings. It's basically become a news site, though, because it only trades on some of its journalism – genuinely a solid scheme.

And then there's the whole instinct thing for all the WSB people. George Costanza found out he was wrong 100% of the time, so he shorted a stock whenever he thought he should buy it. But it's tougher to sell this story as a hedge fund. Could you imagine walking into some shareholder's office and telling them to give you a billion dollars because you get everything wrongly right?

But even that skill can be tracked, and if you're terrible, your broker might just be tempted to indulge in the WSB hive-mind:

CME Group accused Wing Fung Futures Limited of deploying an automated trading system (ATS) in various currencies and markets. The ATS was tasked with submitting orders based on trades executed by specific clients who were regularly unprofitable. The ATS was explicitly tasked with identifying when certain accounts took long/short positions and entering orders for the same quantity and price in the opposite direction. 

BASICALLY, this brokerage firm used a system that tracked specific clients' trades and went against them because they were THAT wrong.

My stomach was cramping because of how much this made me laugh. It's hilarious that someone would have the balls to accuse their broker of betting against you because you do horrendous things. 

The panel found that Wing Fung attempted to profit from knowledge unavailable to the public market. I suppose if you're a client-facing foreign currency firm and your clients are absolutely rubbish at currency trading, it's pretty intelligent to internalise their orders and bet against them. But even the trading industry has social standards to uphold—we can't appear rude. 

If You Need Money Now… Get Hired By OpenAI? 

Perhaps the easiest way to make money is:

• Get a job

• Sign an NDA with that job

• Go home

• Send it to the SEC 

• The SEC fines your company $10 million

• You earn $3 million for your compliance

• You keep your job. 

Now, nobody here is stupid… well, some… or at least, idk, those of you who still believe that there is such a thing as a stupid question, but the point is, it's not that simple. 

My steadfast method of earning $3 million is based entirely on the SEC's whistleblower protection rule, which protects whistleblowers from whistleblowing by preventing third parties from interfering. So, even something as basic as an NDA threatens to prevent a whistleblower from whistleblowing. Imagine:

1. You find out that your company is manipulating earnings reports and doing various other forms of securities fraud

2. You signed an NDA with your company that states you wouldn't disclose any company secrets, and this is a secret

3. You now think that you cannot whistleblow because your company can sue you for breaking the NDA if you do

4. That's scary, so you don't

That is precisely what the SEC wants to stop with its whistleblower protection rule. But, if your company's NDA specifically encourages you to whistleblow should you notice anything, then making you sign an NDA is fine because it is encouraging enough. 

Anyway, I say this because The Washington Post reported:

OpenAI whistleblowers have filed a complaint with the Securities and Exchange Commission alleging the artificial intelligence company illegally prohibited its employees from warning regulators about the grave risks its technology may pose to humanity, calling for an investigation.

The whistleblowers said OpenAI issued its employees overly restrictive employment, severance and nondisclosure agreements that could have led to penalties against workers who raised concerns about OpenAI to federal regulators, according to a seven-page letter sent to the SEC commissioner earlier this month that referred to the formal complaint. 

OpenAI made staff sign employee agreements that required them to waive their federal rights to whistleblower compensation, the letter said. 

These agreements also required OpenAI staff to get prior consent from the company if they wished to disclose information to federal authorities. OpenAI did not create exemptions in its employee nondisparagement clauses for disclosing securities violations to the SEC.

Pretty fun story to start the month. I'm not a fan of OpenAI because they blatantly forgot about the whole "open" part of the AI company, so I'm kinda rooting for these whistleblowers!  

Passi's Son Is Pissy

A few posts ago, I wrote about Pawan Passi and his work at Morgan Stanley (MS), specifically how he and his team leaked block trades, which caused some people to lose and others to make money. Basically, people with money and stocks would contact MS and tell them that they will sell a large chunk of stock X and that they must prepare a bid for it. It seems fairly straightforward, except that MS needs to keep it confidential; otherwise, other people with money and stocks will sell the stock preemptively, knowing the price will drop. Passi, however, would call up a few hedge funds and tell them about an incoming trade, after which the funds would short the stock. 

I've thrown in a cheeky plug to the post here.

When US regulators investigated the situation, they said he had been a naughty boy, fined MS a lot of money, and banned Passi from the securities industry for a year. People were a bit confused when the hedge funds that Passi helped never got fined. But essentially, it's because Passi knew he was doing something wrong, but the funds didn't necessarily know that the information was confidential: "MS is a reliable company after all; they wouldn't betray their clients!" 

That's already messy, but it's made complicated by the fact that the funds would tell Passi

1. "I know who my daddy is"

2. "I would be at the kiddie table if it wasn't for [Passi]."

Now, I don't know about you, but if I get a good deal on, say, a car, I won't call my salesperson daddy. But to each their own… 

I repeat all of this because one of the traders, Passi's figurative son, literally the guy that called him daddy, is suing his employer for a $7.5 million bonus that he says his company owes him. The hedge fund, Evolution Capital Management, said they can't pay him his bonus because of  "disreputable conduct" – I guess calling Passi daddy?

Gagliardi, the trader, still says he did nothing wrong. He claims that since no regulator accused him or the fund of wrongdoing, his employer's refusal to give him his bonus is part of a "smear campaign." The SEC had "confirmed expressly" in a letter that "on the basis of the matters to date it does not recommend that any action be taken" against him. Blah Blah.

So he might've traded on an illegal tip, but he didn't know that the tip was illegal. He made money, he earned it, he deserves it. Idk, if he gets the 7 million in the end, I might start calling people daddy more often. 

We're done for the day! Here's some things to keep your mind running:

• Bill Ackman is having an IPO for a public hedge fund built for retail investors, claiming it’ll be the first of its kind to trade about Net Asset Value. That’s all gibberish, but the point is that he’s using his social media stardom to make billions more, and I respect it.

• I saw an eerie video of a guy talking to AI about an upcoming interview, and the AI laughed and expressed emotions. I’m curious how you feel about how authentic AI is becoming… if you see me in person, just bring it up, I’d be happy to talk.

Thank you for reading this article. If you enjoyed it, share it with your friends and family using the button below and subscribe if you don't want to miss out on more! 

Please comment below if you have any questions or want to discuss further. Have a wonderful day!