The Dark Web Was Used to Sell Insider Trading “Tips;” From Where is Your Data Coming?

The Dark Web Was Used to Sell Insider Trading “Tips;” From Where is Your Data Coming?

Of course, if you are reading this blog post, you likely are not the type of person to sell or buy illegal information on the Dark Web.  One individual who did is now in the crosshairs of both the SEC and the US Attorney’s Office for the Southern District of New York. 

According to the SEC’s complaint, from at least December 2016 through early 2021, the individual engaged in a deceptive scheme to offer and sell information on Dark Web marketplaces to purchasers, who then gained an unfair advantage in trading securities on the public markets.[1] The information was claimed to be order-book data from a securities trading firm, provided by an employee of that firm, and pre-release earnings reports of publicly traded companies.  The information was sold through one-off sales, as well as weekly and monthly subscriptions.  Unbeknownst to the individual, he was selling to undercover IRS and FBI agents.

As said, likely you are not buying information off the Dark Web to use for your investment decisions. But, do you know as a compliance or investment professional from where your information is coming?  Is it information that, for example, is obtained lawfully for dissemination to you and others; or is it information that provides you with an unfair advantage (albeit with an emphasis on unfair)?  Are you documenting your investment process, such that you can demonstrate your underlying investment rationale? What data did you use to reach your decision; did it come from an Expert Network Firm with documented processes and material, non-public information controls; or from where?

CSS consultants can assist you with understanding the significance of these questions, establish sound material, non-public information controls, and document solid investment memoranda. We do not want you to become embroiled in any deceptive scheme that will undoubtedly lead to insider trading charges. Nor do we want you to face a regulatory action for failure to adequately document your investment process or establish and implement policies and procedures around material, non-public information.

Additionally, although not directly related to data sourcing, CSS also offers dark web monitoring services which enable firms to stay on top of compromises of their staff credentials, which can be used by hackers to obtain sensitive information about your firm, your clients, and your investments. To take advantage of any of these services, contact [email protected].

We look forward to working with you.


[1] As explained in the SEC’s complaint, the Dark Web is a part of the internet that requires specialized software to access and is specifically designed to facilitate anonymity by obscuring users’ identities, including by hiding users’ internet protocol addresses. It is used to sell and purchase illegal products and services. Notably, per the SEC complaint, bitcoin and other digital assets are the primary medium of exchange on Dark Web marketplaces because of the anonymity such assets appear to offer.