The Latest 'Insider Trading' Scam


The FBI has raided several firms with charges of "insider trading," claiming that "expert networks," have given "non-public" information to clients working in mostly hedge funds and mutual funds, according to the Wall Street Journal. I had never even heard of "expert networks" until this latest example of why there should not be a State-monopoly in law and justice.

According to the Journal, expert networks are companies that "set up meetings and calls with current and former managers from hundreds of companies for traders seeking an investing edge."

Yeah, so?

Jeepers, it's too bad that the government's monopoly in law and justice has created a criminal racket in and of itself in the business of persecuting people for behaviors that harm no one. Usually, a "crime" is something in which there is a victim.

But this sure is bringing back memories of when former New York U.S. attorney and horse's ass Rudy Giuliani was persecuting financier Michael Milken. What was Milken's crime, and who were his victims, Mr. Giuliani? Milken's crime was making a lot of money, but some public "servants" such as Rudy didn't like that.

The welfare state in America has created generations of people, especially those who feed at the public trough, who feel great resentment and envy toward someone who gets rich honestly (as opposed to getting rich by feeding at the public trough). In fact, Milken wasn't even involved in "insider trading," according to Milken's website, which clarifies the many myths surrounding Giuliani's persecution of Milken.

In the current situation, the expert networks allegedly acquired information from present and former managers of various companies, and then gave the so-called "inside" information to clients who then made investments accordingly. But neither the expert network people nor their clients are alleged to have committed any actual acts of theft or fraud. Did the networks steal the information? Did they engage in any acts of trespassing or breaking and entering to acquire that information? Apparently not.

To me, and to most people who really have any actual understanding of ethics and morality, in a land of freedom, which ours was meant to be but obviously isn't, the only categories of acts that should be considered "against the law" are theft, trespass, fraud and actual physical aggression against others. It's all based on the same kind of private property rights that the American Founders (at least, most of them) believed in. That was what America was to be based on.

Libertarian author Tibor Machan, who wrote about the feds' persecution of Living entrepreneur Martha Stewart for so-called "insider trading," noted that

If one learns of something from a friend or overhears a conversation or obtains the knowledge via a psychic, there is nothing wrong with making a profitable move that others hadn't had the chance to make…

This, by the way, is so elementary that it is amazing that more editorialists and pundits do not make note of it. After all, in the newspaper business a great deal hinges on scooping the competition. Indeed, reporters receive prizes for doing this, namely, jumping ahead of the crowd with information only they got a hold of so as to score! They and their editors should be especially keen on condemning federal insider trading laws – by the logic of such laws, scooping would have to be prohibited…

Insider trading laws aim to mimic rules of golf, baseball and football, all of which aim to even things out between competitors. But this isn't because it is unfair to have an advantage, not at all. It's because the fans wouldn't like a contest in which the same folks – individuals or teams – keep winning. So, to make things interesting, rules are introduced that will mix things up a bit.

Finance, however, is not a game! Its aim is to secure prosperity, economic success. And that requires savvy, acumen, not bending over backwards to please one's competitors.

Unfortunately, with the government's monopoly on law and justice, we now have a Justice Department, FBI and others among the royal bureaucracies with investigations and persecutions of innocent businessmen who are not committing actual crimes, while the bureaucrats seem to be ignoring the widespread egregious fraud that has allegedly been going on with the banks in what is probably the biggest foreclosure fraud scandal in America.

"But that's too difficult for us," the sainted crime bureaucrat exclaims. "Going after people who are minding their own business is much, much easier for us. Gimme a break!"

Well, right along with what I see as our desperate need to get rid of the current federal monopoly in national security, which so much evidence from the past century and current times suggests is making us less secure and less safe, so should we also get rid of the government's monopoly in administering law and justice.

The biggest mistake the Founders made was to allow agents of that centralized institution in Washington called the federal government to be above the law. Given a monopoly in anything, and with the power of compulsion over others and the power to be above the Rule of Law, and given human nature, the monopolists will act not in the interests of justice or the interests of "clients" – the plaintiffs or the accused – but will act in ways to feed their egos, gain financially and/or further empower the State.

Like the monopoly in national security, in which we clearly see the road to totalitarianism via the TSA, the federal government's monopoly in law and justice, with ever-accumulating power and control over just about every aspect of life, is also exhibiting a more Soviet style of justice than ever before.

While it may sound absurd to some people, we need to take the power of monopoly away from the government, and that includes the business of law and justice. As Hans-Hermann Hoppe noted, the pressures of competition under the Rule of Law is what would motivate those working in the "justice industry" to actually serve the public, certainly better than the existing compulsory monopoly does.

As Future of Freedom Foundation President Jacob Hornberger suggested, when he wrote about the Securities and Exchange Commission's persecution of Mark Cuban,

There is really only one solution to this tyranny and oppression, and it's not one that involves "reform": Abolish the SEC, one of the most tyrannical, destructive, useless agencies in American history, and repeal all economic regulations, including insider-trading laws. Or to put it another way, restore free enterprise – that is, enterprise that is free of government control – to our nation.

And finally, for a much more accurate perspective on the current insider trading fiasco that the feds have initiated against people whose only crime is making an honest living, CNBC's John Carney gives the bottom line:

Mobsters and terrorists have genuine victims, often easily detectable by their corpses; while the victims of insider trading are far harder to detect. That should be the starting place in any story about government enforcement; who is the victim? When it comes to insider trading, the victim is so hard to detect that it’s far easier to suspect that it may not exist. The victim of insider trading is a Snuffleupagus, someone visible only to the Big Birds behind government desks.