In the first case in which the SEC has arrested investors for conspiring online, Freeman is said to have used his position as a temp at two Manhattan brokerages to glean information on mergers and acquisitions, information he then passed on to other investors in return for 10 percent of the profits. Not that he got the full kickback an estimated $70,000 to $110,000 is said to have flowed into his mailbox via cash stuffed in unsigned birthday cards. "The SEC has been very interested in the area of fraud over the Internet, and this case is just an extension of that," notes TIME Wall Street analyst Dan Kadlec. "In fact, they've done a good job of catching things on the Web. It seems laughable that anybody would try to post any secure information that way."
The term "insider trading" tends to conjure up images of Wall Street fat cats clad in Armani suits sewing up closed-door deals in the wee hours of the night. Well, consider the new face of insider trading: John Freeman, a 34-year-old temp who, with 18 partners, was allegedly able to leverage a bunch of discarded faxes and other office detritus into $8.4 million in ill-gotten gains all through the Web. The federal Securities and Exchange Commission revealed Tuesday that they've charged Freeman and his cohorts with conspiracy and insider trading in the pan-national ring formed two and a half years ago in an AOL chat room. The case highlights the double-edged sword of policing an increasingly diffuse industry. On the downside, SEC investigators say their task has become more complicated as conspirators are increasingly removed from the trading floor and can profit through investors they've never met. At the same time, the feds say the Web is making it easier to track insider traders because, as Freeman is alleged to have done, they leave an electronic trail something Ivan Boesky and Michael Milken never had to worry about