FBI uses social media to look for fraud

2012-11-26 17:14
(Picture: <a href=\http://www.shutterstock.com\>Shutterstock</a> )

(Picture: Shutterstock )

Multimedia   ·   User Galleries   ·   News in Pictures Send us your pictures  ·  Send us your stories

New York – The FBI sees social media as a potential breeding ground for securities fraud, and has agents scouring Twitter and Facebook for tips, according to two top agents overseeing a long-running investigation into insider trading in the $2 trillion hedge fund industry.

April Brooks, a special agent in charge of the New York field office of the Federal Bureau of Investigation, and David Chaves, a supervisory agent, said it is hard to predict the next wave of securities fraud, but they add that it will have a lot to do with advances in technology and social media.

"I will tell you technology will play a huge part, social media, Twitter. Any kind of technology that is new and doesn't exist today, if there is any way to exploit it, these individuals will exploit it," Brooks told Reuters TV in an interview for the Reuters Investment Outlook 2013 Summit.

Brooks and Chaves oversee what the FBI calls "Operation Perfect Hedge," which has led to more than 60 convictions of hedge fund traders, analysts and industry consultants.

Last Tuesday, a day after the Reuters TV interview, the government charged a former employee of Steven A. Cohen's SAC Capital, Mathew Martoma, with a $276 million insider trading scheme that prosecutors called "the most lucrative" ever.

While Cohen, whose $14 billion hedge fund is one of the most successful and best known on Wall Street, was not charged with any wrongdoing, the complaint says he signed off on trades in Elan Corp and Wyeth in July 2008 ahead of bad news about a clinical drug trial the companies were working on.

Brooks and Chaves gave no hints about the SAC case in the interview, and declined to talk about active investigations.

"Some view insider trading as reaching this crescendo, and we have reached a top. I would suggest we have not," Chaves said.

Investors embrace Twitter

Hedge funds, big institutional investors and investment research firms, such as Muddy Waters (@muddywatersre), have embraced Twitter as a platform for sharing their ideas and investment strategies.

On Nov. 20, PIMCO's Bill Gross tweeted via @PIMCO: "Bernanke confirms PIMCO's New Normal after 3 years! 2% economic potential at least for a time. Probably lower & longer Mr. Chairman."

Gross was referring to Ben Bernanke, chairman of the Federal Reserve, and PIMCO's portfolio positioning for what he calls a "New Normal" developed world economy - 2.0 percent real growth and 2 percent inflation.

"People have used Twitter as a powerful distribution mechanism, occasionally with meaningful market impact," said independent analyst Daniel Yu, who is an avid user of Twitter under the handle @LongShortTrader.

Studies and research reports have shown that Twitter can be used as an early indicator of changing investor sentiment around particular stocks and commodities. This allows Twitter data to be used to predict price fluctuations in the market.

One report, authored by academics Johan Bollen, Huina Mao and Xiao-Jun Zeng, says the degree of "calmness" of the Twitterverse can predict - with 87.6 percent accuracy - how the Dow Jones industrial average will move two to six days ahead of time.

Some hedge funds and other investors have criticized U.S. authorities for cracking down on insider trading to distract attention from the fact that law enforcement has not been able to bring any prosecutions against Wall Street bankers over the financial crisis.

Brooks and Chaves acknowledged the criticism. They said there is a desire to prosecute, but the laws are not there to criminalize actions that some think deserve to be punished.

"I wouldn't say we have missed opportunities," Brooks said, commenting on the 2008 financial crisis. "There may be others who are responsible, but who don't necessarily violate the federal statutes."

The two agents, who both work in the securities division of the New York branch of the FBI, said that when they meet with people on Wall Street, they explain there is no vendetta or campaign against the hedge fund industry. The insider trading investigation is simply part of an effort to make the markets more fair for everybody.

"The message is we are out there, and we are going to continue to be out there," Brooks said. "This type of violation, this type of crime impacts everyone."


Read more on:    twitter  |  facebook  |  social networks
NEXT ON NEWS24X
SHARE:

Read News24’s Comments Policy

24.com publishes all comments posted on articles provided that they adhere to our Comments Policy. Should you wish to report a comment for editorial review, please do so by clicking the 'Report Comment' button to the right of each comment.

Comment on this story
2 comments
Add your comment
Comment 0 characters remaining
 

Inside News24

 
/News
 

The most epic YouTube mashup of 2014

Try to see how many of these things gone viral you recognise in this epic mashup YouTube video!

 
 

I love summer.24

Summer Survey!
Stay in shape this summer
Ultimate fails compilation 2014
This sleeping bulldog is you during the holidays

Jobs in Cape Town [change area]

Property [change area]

Travel - Look, Book, Go!

Kalahari.com - shop online today

Grand Theft Auto 5

Now available on PS4, Xbox One and PC from R649. Buy now!

Festive gifts!

Check out our awesome range of festive gifts to make everyone’s wishes come true. Shop now!

Save on Samsung

Cameras, mobile phones, TVs, Tablets and more. While stocks last. Shop now!

Save up to R2200 on electronics! – As seen in the catalogue

Wishing for tech gadgets this festive? Save up to R2100 on hot tech products at kalahari.com. While stocks last. Shop now!

30% off the bestselling books

Save big on the most captivating reads of 2014. While stocks last. Shop now!

OLX Free Classifieds [change area]

Samsung Galaxy s4

Mobile, Cell Phones in South Africa, Western Cape, Cape Town. Date October 24

Best bargain in big bay

Real Estate, Houses - Apartments for Sale in South Africa, Western Cape, Cape Town. Date October 25

VW Golf 6, 1.6 Trendline (Excellent condition)

Vehicles, Cars in South Africa, Western Cape, Cape Town. Date October 25

Horoscopes
Aquarius
Aquarius

You are in an innovative mood and may want to break out and do your own thing today. The Moon moves into Aries which emphasizes...read more

There are new stories on the homepage. Click here to see them.
 
English
Afrikaans
isiZulu

Hello 

Create Profile

Creating your profile will enable you to submit photos and stories to get published on News24.


Please provide a username for your profile page:

This username must be unique, cannot be edited and will be used in the URL to your profile page across the entire 24.com network.

Settings

Location Settings

News24 allows you to edit the display of certain components based on a location. If you wish to personalise the page based on your preferences, please select a location for each component and click "Submit" in order for the changes to take affect.








Facebook Sign-In

Hi News addict,

Join the News24 Community to be involved in breaking the news.

Log in with Facebook to comment and personalise news, weather and listings.