In the dark web, MillionaireMike was a busy guy.
Back in 2016, the account with this nickname bought names, addresses, dates of birth and Social Security numbers in underground markets circulating illicit online merchandise. He took this personal information to open bank accounts on behalf of strangers and used these accounts to conduct insider trading that he obtained from others. Eventually, he himself sold the inside information to an undercover FBI agent.
MillionaireMike is James Roland Jones, a 33-year-old SpaceX engineer who has pleaded guilty to conspiracy to commit securities fraud. A Justice Department criminal complaint details a series of investments Jones made in the spring of 2017, primarily through an unnamed conspiracy account, based on false inside information provided by the undercover person. That summer, the relationship would take a turn: Jones told the undercover agent on July 25 what the profits of an unnamed company would be, investing $ 5,000 on his behalf. Two days later, the numbers came out. They were identical.
The scheme detailed by the DOJ is not particularly unusual. But a complaint filed by the Securities and Exchange Commission on Thursday delves deeply into Jones’ alleged activity and represents the first time the regulator has set its sights on the dark grid.
The SEC paints Jones less as a smart information trader than a scammer, allegedly selling false information tips based on intuitions rather than real knowledge. He claims that Jones first entered the world of insider trading on the dark web in late 2016, when he found a wiki listing several hidden markets. One of them was advertised as “the insider trading community (sic) of public trading companies,” a description that matches that of the so-called onion site called How to Beat Wall Street.
The price of entry to the forum was inside information. Instead of providing it, Jones allegedly tried to guess what future earnings reports would have, in order to give an appearance of knowledge. He was wrong and then he was wrong again and finally on the third attempt he was right, the SEC says. It was inside.
But not for long. How to Beat Wall Street did not cast lifetime members; you had to prove your worth if you wanted to change tips. Jones could not. Within three months, according to the complaint, the moderators revoked their membership. The SEC says that while Jones claims it did not get any useful information from the group, it sparked a revelation: there was a privileged advice market, but most people could not enter exclusive dark web forums. MillionaireMike could fill that gap.
The complaint says Jones began selling “insider tips” in the spring of 2017. “His advice was simply assumptions based on Jones’ own research and speculation, ”the SEC alleges, and they were generally basic: an inventory would increase, or decrease. Jones allegedly sold tips on the same stocks in both directions, offering the following advice for free when it didn’t work, as long as they left a good review on the dark website where they did business. The SEC claims that Jones earned $ 27,000 in bitcoin dollars from eager investors throughout the plan. Jones’ attorney did not respond to any requests for comment.
While the case marks the SEC’s first charges for dark grid securities fraud, its contours are not remarkable. The agency prosecutes dozens of inside information cases each year, though those numbers fell sharply under the Trump administrations. “He invented something and convinced others to change in exchange for bitcoins,” says Urska Velikonja, an expert in securities regulation and enforcement at Georgetown University Law Center. “I see it as a widespread violation, not a change in the direction of SEC enforcement.”