On the dark web, MillionaireMike was a busy guy.
As far back as 2016, the account with that moniker bought names, addresses, dates of birth, and Social Security numbers on the underground marketplaces that traffic in illicit online goods. He took that personal info to open banking accounts in the names of unwitting strangers, and used those accounts to make trades based on insider information he gleaned from others. Eventually, he sold purported insider information himselfto 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 criminal complaint by the Justice Department details a string of investments that Jones made in the spring of 2017, mostly through an unnamed conspirators account, based on phony insider info provided by the undercover fed. That summer, the relationship would flip: Jones told the undercover agent on July 25 what an unnamed company’s earnings 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 especially unusual. But a complaint filed by the Securities and Exchange Commission on Thursday delves much deeper into Joness alleged activityand represents the first time the regulator has set its sights on the dark web.
The SEC paints Jones less as a savvy insider trader than a scammer, allegedly peddling bogus insider tips based on hunches rather than actual insight. It claims that Jones first entered the world of dark web insider trading in late 2016, when he found a wiki that listed various hidden marketplaces. One of them advertised itself as The community for exchanging Insider Information about the (sic) Publicly Traded Companies, a description that matches that of a so-called onion site called How to Beat Wall Street.
The price of entry into the forum was genuine insider information. Rather than provide that, Jones instead allegedly attempted to guess what upcoming earnings reports would hold, in order to give the appearance of insight. He was wrong, and then wrong again, and then finally on the third try he was right, the SEC says. He was in.
But not for long. How to Beat Wall Street did not hand out lifetime memberships; you needed to continue proving your worth if you wanted to swap tips. Jones could not. Within three months, the complaint says, moderators revoked his membership. The SEC says that while Jones claims he didnt get any useful info from the group, it did spark a revelation: There was a market for insider tips, but most people couldnt get into exclusive dark web forums. MillionaireMike could fill in that gap.
The complaint says that Jones began selling insider tips in the spring of 2017. His tips were merely guesses based upon Joness own research and speculation, the SEC alleges, and they were generally basic: a stock would go up, or it would go down. Jones allegedly sold tips for the same stock in both directions, offering the next tip for free when it didnt work outas long as they left a nice review on the dark web site on which they conducted business. The SEC claims that Jones took in $27,000 in bitcoin from eager investors throughout the course of the scheme. Joness lawyer did not respond to a request for comment.
While the case marks the SEC’s first charges over securities fraud on the dark web, its contours are otherwise unremarkable. The agency pursues dozens of insider trading cases every year, although those numbers dipped dramatically under the Trump administrations. He made something up and convinced others to trade in exchange for bitcoin, says Urska Velikonja, a securities regulation and enforcement expert at the Georgetown University Law Center. I see this as a run-of-the mill violation, not a change in SEC enforcement direction.