insider trading : how graphs can help investigators work with big data
DESCRIPTION
Insider trading schemes are hard to detect and hard to prove. Investigators struggle to find evidence in large datasets. Graph analysis and graph visualization can help them.TRANSCRIPT
SAS founded in 2013 in Paris | http://linkurio.us | @linkurious
Insider trading: how graphs can help investigators work with big data
Definition of insider trading.
Insider trading : “the trading of a public company's stock or other securities by individuals with access to non-public information”.
- Wikipedia
SAC Capital makes $275M by betting on the failure of a drug.SAC Capital Advisors was a US hedge fund. In 2008, it had accumulated $750M worth pf Elan and Wyeth. These two companies were pulling their resources to fund a Alzheimer drug called “Bapi”.
On July 29, 2008 a thousand people gathered in Chicago to hear the results of the latest Bapi trials.
In the days leading up to the conference, while no results were publicly available, SAC Capital dumped all its Elan and Wyeth stocks and proceeded to short the companies.
When the July conference revealed Bapi was not working as expected, SAC Capital Advisors pocketed an estimated $275M.
The biggest insider trade of all time.
Steven Cohen (SAC’s CEO) is worth an estimated $11bn
SAC Caîtal Adivsors, a leading US hedge fund.
Cheating.
A $2 billion mistake.
SAC Capital will pay ~$2bn for its insider scheme.
When a secret is revealed it leaves less traces than a gun fight or a drug deal.
The perpetrators are well aware of the law and know how to protect themselves.
Smart perpetrators
Lack of evidence
Exposing a insider trading scheme is hard.
A manager at SAC Capital traded on insider information.
Mathew Martoma develops a relationship with Dr Gilman. His source is directly involved in the drug’s trials. Dr Gilman informs Martoma that Bapi is failing.
Martoma convinces his manager and SAC Capital CEO Steven Cohen to bet against Elan and Wyeth. SAC Capital makes $275M in a single trade.
Mathew Martoma, a Portfolio Manager at SAC Capital decides to invest in Elan and Wyeth. These companies are testing a new miracle drug called Bapi.
A trader wants to bet on a new drug
He obtains illegal information
His firm makes ~$275M
The story of the biggest insider trade.
A very complex investigation.
How to prove it?
Graphs help find the hidden connections.
Finding the link between SAC Capital and the Bapi trials.
SAC Capital Advisors, one of the world’s biggest hedge fund.
Bapineuzumab or “Bapi”, a drug combating the effects of Alzheimer.
How did Capital Advisors learnt the secretive progress of Bapi?
The main protagonists.
The connections between the main protagonists.
How the insider information was obtained.
Mathew Martoma obtained information via Dr Gilman.
Data investigation methods.
Automatically find the connections (even the most indirect) between elements. Can be done at large scale.
Manually processing information to find suspicious connections. Does not scale up.
Traditional investigation
Graphanalysis
Graphs help find connections in big data.
Mixing sources to see how the suspects are connected.
Physical meeting. Phone call. Mail.
Graphs can help investigators find evidence.
Linkurious allows investigators to explore visually the information and to look for specific patterns. More results, faster.
The investigators can use visualization to communicate their findings. It helps collaboration and obtain convictions.
Working with data coming from various sources is complex. A graph allows you to link the events, persons or organizations together.
Track the relations
Find hidden insights
Communicate results
Graphs and data investigation
Blog post on the SAC Capital insider trading scheme : https://linkurio.us/using-graphs-to-uncover-insider-trading-schemes/
Sources :- http://blogs.reuters.com/alison-frankel/2014/08/15/the-audacious-theory-in-
elan-investors-insider-trading-suit-vs-sac- http://www.newyorker.com/magazine/2014/10/13/empire-edge- http://dealbook.nytimes.com/2014/09/09/punishments-for-insider-trading-
are-growing-stiffer/- http://dealbook.nytimes.com/2013/11/04/sac-capital-agrees-to-plead-guilty-
to-insider-trading/
Additional resources.