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 himself—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 criminal complaint by the Justice Department details a string of investments that Jones made in the spring of 2017, mostly through an unnamed conspirator’s 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 Jones’ alleged activity—and 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 didn’t get any useful info from the group, it did spark a revelation: There was a market for insider tips, but most people couldn’t 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 Jones’s 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 didn’t work out—as 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. Jones’s 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.”
It’s still a signal to the dark web insider trading world that it can no longer act with complete impunity. “This case shows that the SEC can and will pursue securities law violators wherever they operate, even on the dark web,” said SEC Forth Worth regional office director David L. Peavler in a statement. “We have committed staff and technology to pierce the cloak of anonymity these wrongdoers try to throw over their crimes.”
The SEC’s attention to the dark web comes as law enforcement agencies more broadly have cracked down on illicit activity there. Last fall, a global takedown resulted in 179 arrests spread across six countries. In 2019, a string of drug-related dark web bazaars went dark as authorities homed in. That same year, investigators took down a massive, underground site that peddled in child sex abuse material. And prior to that, Dutch police not only infiltrated the dark web marketplace Hansa; they ran it for weeks to collect evidence and surveil users.
In some ways, then, the focus on dark web insider trading was inevitable. If anything, it’s surprising it took the SEC so long. “The SEC may not have the resources to go after everyone, but wants to scare off as many as it can,” Velikonja says.
It may be too late for this case to make much of a difference as a deterrent. According to new research from security firm Recorded Future, insider trading activity on the dark web peaked a few years ago, and fizzled out after 2018. That year, popular Tor-based site The Stock Insiders shuttered in August, followed a few months later by multipurpose hacking forum Kickass Market. Today, insider trading activity is relatively scarce on the dark web, says Jordan Bell, a threat intelligence analyst at Recorded Future. Perpetrators have likely migrated to more secure encrypted channels instead.
“I think there’s a high demand for this kind of information, I just think it’s been driven to places we can’t see it very easily,” says Bell. “Insider trading just doesn’t lend itself to traditional dark web forums, because once someone has shared the information now it’s out there, no one will pay for it anymore. You have to communicate it privately.”
Jones faces up to five years in federal prison for the DOJ’s conspiracy charge. The SEC says he agreed to a “bifurcated settlement,” still awaiting court approval, that requires he stop committing fraud; further civil penalties will be determined at a later date.
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