In the days before the 9/11 attacks, anonymous investor(s) purchased record numbers of put options on United and American Airlines stock, apparently because they knew the attacks were going to take place and hoping to profit from the resultant fall of American and United’s stock.
My question: How are such anonymous purchases possible? Say I’m not even a terrorist financier, but just a generic crypto-anarchist that doesn’t like the idea of too many people having access to data about my financial transactions–how, exactly, would I make such anonymous trades?
You can’t. But if you have enough money to create the infrastructure you can make it darn hard to find you.
First: In normal course, most exchange trades are “anonymous.” If you place an order through Cecil Investment Advisors to buy some stock, they know who you are, of course. But the seller doesn’t; he sold his stock to Cecil Advisors, not you. If Cecil Advisors is actually buying the stock for its own account there are different disclosure rules depending on the capacity in which they’re doing it. There are also different rules if you are affiliated with the company whose stock you are trading or if you own more than 5% of the company, but we can ignore all that here. What’s important is that a) Cecil Advisors is the only ones who know who you are and b) under almost all circumstances no one asks anything else and c) Cecil Advisors is required by law to know who you are.
Here’s where it gets trickier. Suppose “who you are” is not toadspittle, intrepid knowledge seeker from the SDMB but rather “t-s Holdings Intl Ppy, Ltd.” And let’s further suppose that you have made sure none of the officers or directors is you and your account is in the Canary Islands. It gets a little harder to track “you.” But if necessary, you can probably be found in most instances. Say the SEC wanted to find “you.” They’d go find the officers and directors of your holding company, subpoena records, etc. to find out where the money in the company came from and where it goes. Again, if you’re rich enough you can make a maze of it, but eventually they’ll probably find you.
For the record, the SEC investigation found no incidence of insider trading related to the terrorist attacks. Apparently someone or someones was just putting on a series of big, complex trades betting airline industry – it’s not like there weren’t signs of weakness in that industry even without the attacks.
To echo Manny’s comments:
According to the 9/11 Commission Report on Terrorist Attacks on the United States, no one directly gained financially from the attacks. There was a team put together to look for evidence of selling airlines ‘short’ prior to the attacks but none was ever found.