About: Investoom Weekly is the newsletter by the market intelligence company Investoom that provides AI-powered investment insights through social sentiment data, onchain data and financial data. Investoom democratizes the access to hedge fund insights.

Overview of the topics

• Stocks Highlights: The co-creator of Sonic the Hedgehog has been arrested in Japan for insider trading.
• Social Data: Researchers estimate that only 15% of insider trading in the US is detected and prosecuted.
• Financial Data: A General Atlantic director has acquired more than 520,100 shares from HireRight Holdings Corp.
• Onchain Data: Between March 2021 and 2022 Alameda acquired $60 million of FTX tokens from 18 different listings.
• Deep Dive: Following Terra’s crash in May, FTX’s digital assets began to drop in May 2022.

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Stocks Highlights

Sonic creator arrested for insider trading

The co-creator of the series Sonic the Hedgehog, known as Yuji Naka, has been arrested on Friday by the Japanese authorities. Why? Because of his involvement in an insider trading case, together with the former employees of Square Enix, the multinational holding in which Naka worked.

The scandal mainly concerns Taisuke Sazaki and Fumiaki Suzuki, two former Square Enix employees who purchased 162,000 shares in Aiming, knowing that it was collaborating with Square Enix to create the “Dragon Quest Tact” mobile game. However, the stocks, worth $336,760, were acquired between December 2019 and February 2020, before the public announcement of the project.

What’s the involvement of Naka? Being aware of the Aiming deal, he bought 10,000 shares for $20,000 before the partnership was publicly announced. “We have been fully cooperating with the requests of the SEC commission”, pointed out Square Enix. “We have dealt with this incident strictly, including internal disciplinary actions taken against the suspected employees.”

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Social Data

Only 15% of insider trading is detected

In which cases do we talk about insider trading? When the employees of a public company trade the stocks or securities of the firm possessing non-public information. However, insider trading can be either legal or illegal, depending on the laws of the country the insider is in.

In the US, insider trading is illegal if and only if the material information is still non-public. It happens because the main attempt of the SEC is to maintain a fair marketplace. An investor who has access to more information than the market has an unfair privilege over the others and could make larger, unfair profits than the other market operators.

Researchers have shown that insider trading is more common than we think. Estimates indicate that insider trading occurs once in five mergers and once in 20 quarterly earnings announcements. However, it’s not easy to prevent and prove. A 2020 study estimated that only 15% of insider trading events in the US are detected and prosecuted.

One of the few cases of insider trading that have been prosecuted was the 2004 sentence for the American businesswoman Martha Stewart. She sold 4,000 ImClone shares one day before that firm's stock price plummeted. The case is not the only one involving the NASDAQ-OMX; the index has suffered of 50 insider trading cases.

In 2016 billionaire Steven Cohen's hedge fund SAC Capital Advisors LP paid $135 million to solve a lawsuit by Elan Corp’s shareholders, which claimed they lost money because of the insider trading existing within the company.In 2020, instead, US republican Chris Collins was sentenced to 26 monthsin prison for being involved in an insider trading case, lying to the FBI.

Since insider trading discourages investors from participating in financial markets and creates difficulties for companies that want to raise capital, it is associated with negative concepts. Looking at the contents published by Twitter investors, “insider trading” is often associated with the word “crash”.

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Financial Data

Over 11,000 transactions per month

Over the last month, there have been 11,332 insider trading transactions. Among them, 2,992 were purchases and 8,340 sales. Indeed, the value of the sales has overcome the value of the purchases by $22.5 billion.

Among the last 10 transactions, there is General Atlantic Genpar, a growth equity firm with 455 employees, $73 billion assets over their management, and 227 investment professionals. Recently, the leading payment unicorn PhonePe has been in talks with General Atlantic to raise funding at a valuation of over $12 billion. Since the funding would make the financial services company the most-valued fintech in India, the sentiment towards General Atlantic has been extremely positive.

In particular, a director of General Atlantic has acquired more than 520,100 shares from the risk management company HireRight Holdings Corp (HRT). The total transaction amounted to $5,525,462. In fact, even if in the last 12 months the stocks of the company have fallen -46.53%, this week they have gained 21.92%.

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Onchain Data

Alameda involved in insider trading

Financial information isn’t the only one that reveals the presence of insider trading. Indeed, during the past week, on-chain data have demonstrated that the company founded by Bankman-Fried, Alameda Research, acquired FTX tokens a month before its quotes.

Alameda Research had amassed a large number of tokens ahead of specific FTX listings. Between March 2021 and March 2022, Alameda acquired $60 million of such tokens from 18 different FTX listings. “What we see is that they almost always in the month before bought a position that they didn’t have before. There is something in the market that is telling them that they should buy things that they didn’t have before“ pointed out Omar Amjad, co-founder of Argus.

However, former FTX CEO Bankman-Fried never admitted that Alameda had access to more information than the crypto market makers. He told the news outlet that “Alameda traders did not have special access to customer information, market data, or transactions“.

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Community

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News of the week

• BTC: Bitcoin exchanges see 180K BTC supply decrease amid Mt. Gox BTC sales. [Read more]
• ETH: Anxious Ethereum stakers question when they’ll be able to access funds. [Read more]
• Twitter: What Elon Musk is doing to Twitter is what he did at Tesla and SpaceX. [Read more]
• Exchange: Binance deploys $1 billion to keep the crypto industry afloat after FTX collapse. [Read more]

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About

Investoom is a Munich-based Fintech Startup democratizing the access to quantitative investment insights that are used by big hedge funds, but are inaccessible to retail investors. We are a market intelligence company that provides AI-powered investment insights through social sentiment data, onchain data and financial data.

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