00:03This is Apropos. The White House has hit back at suspicions of insider trading after an unusual
00:09spike in oil features. Some analysts are pointing to activity on Monday when an abrupt burst of
00:15oil features trading hit the markets about 15 minutes before President Trump announced he was
00:20delaying threatened strikes on Iranian energy targets. It's raising questions on if anyone
00:26acted on insider knowledge. Allegations, the White House says, are baseless and irresponsible.
00:32Danana D'Souza reports.
00:36It's an anomaly which stood out on global trading floors at the start of the week.
00:44Someone sold oil at an excellent price a few minutes before the price dropped over 10 percent.
00:49So it's a great trade.
00:53A transaction placed Monday when the energy markets were stable, 15 minutes before a truth
00:59social post from Donald Trump. It resulted in the price of oil plunging 14 percent. A windfall for
01:06whoever hedged their bets. It raises some questions. Either someone has a great instinct and a lot of
01:12luck, which can happen, or it was someone who was tipped off. There aren't other possibilities.
01:16Traders reportedly made bets worth around half a billion dollars in the oil market before Trump's
01:22post. And for now, it's unclear if one or several entities were behind Monday's trades.
01:29Perhaps some of these actions occurred from participants in the Middle East rather than
01:34within the administration. So I want to be super cautious about pointing fingers at anyone on that
01:39front. But it was highly suspicious. While the White House says the administration doesn't
01:44tolerate any official illegally profiteering off of insider trading, some Democrats are raising
01:49alarm bells, calling the moves mind-blowing corruption. For now, there isn't any proof of
01:55market manipulation. But Monday's well-timed trades are similar to profitable bets made on prediction
02:01site Polymarket, which allows clients to place wagers on real-world events. Certain users anticipated the
02:09capture of Venezuela's President Nicolas Maduro or the killing of Iran's supreme leader with some
02:14accounts created a few minutes before the incident unfolded. Hedging bets on Trump's decisions has now
02:20become profitable business for some.
02:24Well, to help unpack all of this further with us, let's bring in Mizian Lasfa, who is a Professor of
02:31Finance at the
02:32University, City University in London. Mizian, thank you so much for being with us on the program. First of all,
02:39what do you
02:40make of all of this? Is this just a lucky coincidence? Or are we looking at evidence of insider trading?
02:47Thank you for inviting me. So I think it is a really kind of critical question here as to whether
02:53it is insider trading or not,
02:55because on the one hand, we could see that it fits in within the definition of insider trading. But on
03:02the other hand, it
03:02complicates the issue. It fits in within what we mean by insider trading. It's really trading on insider information that
03:10the market
03:11doesn't have. So you do have private information that we trade on, but the market doesn't have it. So it's
03:18like really
03:18cheating the market effectively. But the problem is really kind of defining what is this information and whether really kind
03:25of
03:25those traders really got the information. So from a legal purpose, first of all, I'm not legal. I'm not a
03:32lawyer. So I'm
03:32prophet of finance. I do research on insider trading. However, in order to do that research, I need to know
03:38a little bit of the law. So that's
03:40really what I'm going to explain here. So from a perspective of insider trading, really kind of the SEC in
03:481934, clearly defined insider trading, that it is when you breach the duty of trust or confidence, you trade, the
03:57trades are based on material and non-public information, and the trader knew the information was not public. That is,
04:06therefore, it is a breach of duty. What we need to focus on here is on those two main factors,
04:13which is
04:13materiality and non-public. So materiality, as you rightly showed in your report, it's really quite huge
04:22because they traded half billion. And then the price on the on the Texas in the West Texas
04:29intermediate declined by about 14 percent, as you mentioned. So the gain is really going to be quite
04:36substantial. So but however, what is interesting there is that if you look at the graph, I don't know
04:41whether the audience have noticed or not, is that there was really nothing, no change when the when the trade
04:49occurred occurred. So the change occurred only when the information is released. So when Trump put that
04:58information. So in other words, the other traders in the market really didn't know about it, because
05:04otherwise we would have seen a really very big drop in the price of oil when this trade has occurred.
05:11But it's really kind of it's after 15 minutes later that we have this drop in in in in in
05:20the oil price that
05:21really that there is a manifestation there of the reaction towards the the oil price. So from that
05:28perspective, we can really kind of define it that it is from materiality perspective. It is kind of clear that
05:36it is
05:36inside the trading. However, there is this non public element that causes some some issues there. So in
05:44other words, that we need to find out that really those traders traded on information that is not publicly
05:53available. That is really kind of the other market didn't didn't know. So so it could be that the
06:01traders just use some algorithm models, it could be that there was trading or technical trading, in
06:07which case and it is legally trading because they just exploiting their knowledge, exploiting
06:12or exploiting really their kind of expertise in trading in the market. And then they guess it right.
06:20So maybe other days they got it wrong. Maybe they traded a lot, but really nothing happened.
06:25The second one is that. So in this case, then it is legal trading. We cannot say that it is
06:33not illegal.
06:34But on the other hand, if it is if the trader really knew exactly what the news is going to
06:40come up,
06:41and they traded 15 minutes before taking advantage of that information, then we can consider this as
06:48being non public and therefore insider trading on insider information.
06:55Thank you so much for that breakdown. Let's move on because we are running out of time.
07:01And, you know, if what we are suspecting is true here, that we are seeing evidence of insider trading,
07:07how can regulators realistic realistically police platforms like Polymarket, as we mentioned in that
07:15report, where it's so hard to trace the identities of those making the bets?
07:22It is it is very difficult for the market really kind of for the regulator really to find out. So
07:28in other words, there will be really lots of investigation by the SEC. And therefore,
07:34they will really kind of look at those two elements that I mentioned there materiality effect and
07:40the non public information factor. So they will investigate, for example, whether this trade is
07:47just one off. So really kind of that trader or those traders didn't trade before. So they wouldn't say
07:54that it is just kind of if they were trading all the time that from my research that I have
08:00done,
08:00then when you see that the traders are very expert, in other words, they trade quite a lot, then it
08:07is
08:07very difficult for the regulator to find out that they are trading specifically on that information,
08:14because they are just normal traders. But it is just one off, then that is really the case for the
08:19regulator to consider. So they need to consider also whether there is any linkage of information,
08:26whether there is a kind of transmission of information from really the government into
08:35those traders. There is also the fact that in general, it's quite costly really to go after those traders,
08:46because it takes time and also it's very difficult to investigate. So really kind of the regulator is going
08:56to be in a position, very difficult position of really proving that the trader knew that this information
09:04is going to be released and that they traded really on their own conscience to take advantage of that
09:14information. So overall, really, the regulator is going to have some difficulties in finding out. However, we've got the
09:22regulation there, even because it is in the oil rather than the shares where I do my research. So even
09:28in the commodities,
09:30there is there is strict regulation that whoever trades on inside information will be prosecuted. And we had the number
09:37of cases
09:38where the kind of those typical traders have kind of were prosecuted. Well, the big question is whether, you know,
09:49there was a leak here,
09:50whether information like this is falling into the hands of people who make bets like on platforms like Polymarket.
09:58Should we see this also as a threat to national security where perhaps information like this is being circulated in
10:04these kind of circles so freely?
10:09That's really kind of another critical issue here, comparing to the research I do. Well, my research is mainly on
10:16the companies on the inside
10:17the trading by the directors of companies. So it's kind of lead and they trade on different information like earnings
10:24announcements,
10:25mergers and acquisitions, kind of the profit warnings, etc, where the information is only kind of limited to the company.
10:33But here, the case is really kind of is much,
10:36much more complicated because, as you rightly said, it is security information. So if they find out that really some
10:44people
10:44have got that security information well before it is disclosed, then there is some failure in the communication of the
10:53government.
10:53So it makes it really very, very complicated.
10:56And we've also seen throughout President Donald Trump's presidency, we've seen his family members profiting from the political context we
11:06find ourselves in.
11:08Eric and Donald Trump Jr. have invested in drone companies that have been competing for Pentagon contracts.
11:15We've also had Gerard Kushner, Donald Trump's son-in-law, seeking to raise billions for his private equity fund
11:23from Gulf countries currently entangled in the war that we are seeing right now.
11:29Should there be more stricter regulations to prevent Donald Trump's family from financially benefiting from political activities
11:38or from, you know, the context that we find ourselves in now from war?
11:44I think so, to a large extent. What you said is right.
11:49But however, there is a kind of another complexity here is that it's really political.
11:53So there will be the legislator that is involved there, but also the politicians that are going to be involved.
12:01So I would guess that, for example, if it was in the UK, we have a specific regulator for the
12:07politicians.
12:08We have, for example, the National Audit Office that is really kind of controlling all the activities of the politicians.
12:16So it makes it a little bit much more kind of you have the FCA that is going to get
12:22involved,
12:23the Financial Conduct Authority that is going to get involved from regulation of the market.
12:28But you have also the National Audit Office that is going to investigate to see really whether those transactions really
12:35occurred from a political perspective.
12:37I would guess that in the U.S. it's the same. They have the SEC that is going to investigate
12:43from this insider trading regulation to apply the regulation.
12:47But also there may be a kind of the Senate maybe that is normally going to investigate whether it is
12:54driven by political connections or something like that,
12:57which I cannot really comment on that side because it's not my area.
13:01But I would think that really from the Securities and Exchange Commission kind of side,
13:09there will be really kind of looking at this very, very kind of thoroughly to check whether it is done
13:16personally,
13:17whether it is an insider trading and with trading who has got this private information.
13:24And then it might probably go into the politicians to deal with the case.
13:30Ms. Yan, thank you so much for your insight on this. A really thorough explanation from you.
13:34Thank you for joining us on the programme.
13:36Thank you very much for inviting me.
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