Are Penalties for Insider Trading Tough Enough?


The man behind Australia’s biggest case of insider trading has been sentenced to seven years and three months in prison. Lukas Kamay, 26, will serve a non-parole period of four years and six months after being sentenced in the Victorian Supreme Court last week. Kamay’s sentence is the longest ever given for insider trading in Australia. His conviction is also the first for an insider trading scam involving the foreign exchange markets.

The background of the case

Kamay, a former employee at the National Australia Bank (NAB), was charged with insider trading last year and pleaded guilty to the offence, which also involved his friend, former Australian Bureau of Statistics (ABS) employee Christopher Hill.

Australia isn’t known for having a long list of convicted insider traders, and the illegal insider trading scheme perpetrated by Kamay and Hill is the largest to end up in court so far. Kamay made $7.2 million, while Hill gained $19,500 from the trading, which involved Hill passing confidential data gained from his employment at the ABS to Kamay, who then used it to predict changes in the Australian dollar on the foreign exchange market.

The Kamay insider trading scheme took place between August 2013 and May 2014, and was brought to the attention of the Australian Federal Police (AFP) after a stockbroker Kamay worked with became suspicious. He checked Kamay’s LinkedIn profile and noticed that he was friends with Hill, an ABS employee. Once the information was passed on to the AFP, they monitored Kamay in a controversial sting operation over the next four months.

The sentence

Although Kamay expressed remorse to the court, the Justice presiding over the matter was unimpressed, stating his reluctance to concede a number of matters and his continued attempts to blame Hill instead of owning up to full responsibility as contributing to the length of his sentence. He was also required to forfeit all his assets, including equity in some property that wasn’t purchased with the proceeds of his illegal trades.

Hill will serve a minimum of two years in prison for his part in the scheme.

Technology makes insider trading investigations faster

This case has drawn attention to the speed at which ASIC investigates insider trading cases now, compared to in previous years. Surveillance technology and relationships with other law enforcement agencies including the AFP means that the efficiency and speed of investigations is increasing, as is the likelihood of building a strong case using methods similar to those used to catch Lukas Kamay.

Previous convictions for insider trading have taken years to secure.

In 2011, equities dealer John Hartman was sentenced to three years in jail for 19 insider trading counts involving 50 illegal trades that had taken place in 2007 and 2008.

Another convicted insider trader Nicholas Glynatsis was sentenced to three years after he had stopped trading, and Calvin Zhu who was an executive of Hanlong Mining, wasn’t convicted until six years after the offences were committed.

Is the AFP chasing the right people?

According to the Australian Financial Review, there has been a certain amount of criticism levelled at ASIC for chasing smaller insider trading matters, while ignoring the bigger banks and leaving them well alone. This is a claim refuted by ASIC.

Is company culture to blame?

Lukas Kamay largely blamed the culture at the NAB for putting employees under pressure to be successful and make money. A psychological report prepared for the court disclosed that he felt the pressure to succeed in a highly competitive work environment, and for him this meant being financially successful.

Information from the NAB indicates that their employees are encouraged to “deliver exceptional outcomes that push the limits of expectations,” but it was also noted that along with that, the NAB includes doing the “right thing” under its list of company behaviours and beliefs.

Was the sentence harsh enough?

Although the longest sentence given for insider trading in Australia, many believe that seven years was insufficient given the amount of money involved and the potential impact on the market. The maximum penalty for insider trading is 10 years in prison, and nobody has received a sentence of that length in Australia.

Penalties are getting stronger for insider trading and other forms of white-collar crime, believed to be in line with evolving community expectations. The fact is, insider trading has the potential to affect markets and the economy on a wider scale, yet the penalties can be lower than for other forms of fraud that impact people and organisations on an individual level.


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About Ugur Nedim

Ugur Nedim is an Accredited Specialist Criminal Lawyer and Principal at Sydney Criminal Lawyers, Sydney's leading firm of criminal and traffic defence lawyers.
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