In the dark Web, MillionaireMike was a very busy guy.
As early as 2016, the account with the moniker was buying names, addresses, dates of birth and social security numbers in the underground markets that smuggle goods online illicitly. He took this personal information to open bank accounts on behalf of unwitting strangers and used those accounts to transact based on insider information he had gleaned from other people. Eventually, he sold alleged insider information himself – to an undercover FBI agent.
MillionaireMike is James Roland Jones, a 33-year-old SpaceX engineer who pleaded guilty to conspiring to commit securities fraud. A criminal complaint by the Department of Justice details a series of investments Jones made in the spring of 2017, mostly through the account of an anonymous conspirator, based on false insider information provided by the undercover Fed. That summer, the relationship would take a turn: Jones told the undercover agent on July 25 what the earnings of an anonymous company would be, investing $ 5,000 on his behalf. Two days later, the numbers came out. They were identical.
The diagram detailed by the DOJ is not particularly unusual. But one complaint filed by the Securities and Exchange Commission on Thursday delves much deeper into Jones’ alleged activity – and marks the first time the regulator has set its sights on the dark web.
The SEC portrays Jones less as a sophisticated insider trader than a con man, allegedly peddling false insider advice based on hunches rather than actual information. He claims Jones first entered the world of dark web insider trading at the end of 2016, when he found a wiki listing various hidden markets. One of them introduced himself as “the community for the exchange of inside information on (sic) listed companies”, a description which corresponds to that of a so called onion site called How to Beat Wall Street.
The price of entry into the forum was real insider information. Rather than providing this, Jones would rather have attempted to guess what the next income reports would contain, in order to give the appearance of insight. He was wrong, then again, and finally, on the third try, he was right, the SEC said. He was in it.
But not for long. How To Beat Wall Street Didn’t Give Out Lifetime Memberships; you had to keep proving your worth if you wanted to redeem tips. Jones couldn’t. Within three months, according to the complaint, the moderators revoked his membership. The SEC claims that while Jones claims he didn’t get any useful information from the group, it sparked a revelation: There was a market for insider advice, but most people couldn’t access exclusive forums on the dark web. MillionaireMike could fill this gap.
The complaint says Jones began selling “insider tips” in the spring of 2017. “His advice was just guesses based on Jones’ own research and speculation,” the SEC alleges, and it was generally basic: an action would increase, or it would fall. Jones reportedly sold tips for the same stock back and forth, offering the next tip for free when that didn’t work – provided they left a nice review on the dark website they were doing business on. The SEC claims Jones cashed in $ 27,000 in bitcoin from enthusiastic investors throughout the program. Jones’ attorney did not respond to a request for comment.
While the case marks the SEC’s first accusations of dark web securities fraud, its outlines are otherwise unremarkable. The agency pursues dozens of insider trading cases each year, although these figures dramatically dived under the Trump administrations. “He invented something and convinced other people to trade for bitcoin,” says Urska Velikonja, a securities regulation and enforcement expert at Georgetown University Law Center. “I see this as an ordinary violation, not as a change in the direction of SEC enforcement.