Inside Story

The insiders

A new podcast brilliantly tracks Australia’s “biggest insider trading case.” But does it let the authorities off too lightly?

Jeremy Gans 7 June 2021 4071 words

The Sure Thing’s villain: Lukas Kamay leaving the Melbourne Magistrates Court after being charged with insider trading on 9 May 2014. Julian Smith/AAP Image

At a Mornington Peninsula birthday bash in 2013, two Monash University graduates hatched a plan to make some easy money. Twenty-five-year-old Lukas Kamay, who worked at the National Australia Bank’s foreign exchange desk, knew his way around the bespoke financial products that businesses use to manage the risk of currency fluctuations. As per the plan, he opened a personal trading account with a broker, Pepperstone, and, every fortnight or so, bought “contracts for difference” whose worth rises and falls with short-term movements in the Australian dollar.

All went well. Too well. While the canniest speculators usually do only slightly better than chance when it comes to currency predictions over the short term, Kamay’s account won sixteen of its twenty-one bets on how the dollar would shift. A year after the friends’ deal was struck — and thanks to Pepperstone’s letting them lever small bets into much larger gains (or losses) — they were just a little short of their shared goal of a $200,000 profit, a 20,000 per cent return on their $1000 investment.

That’s the moment where Australia’s latest true crime podcast, The Sure Thing, kicks off. On the morning of 9 May 2014, the pair woke to police dogs barking outside their homes in Melbourne and Canberra. Another year down the track, their shared scheme had landed each of them with a two-year prison sentence for insider trading. And that was only the start of each man’s problems with the criminal justice system.

The secret to the pair’s success was Kamay’s partner in crime, twenty-four-year-old Christopher Hill, who had landed a job analysing labour figures for the Australian Bureau of Statistics. At 11.30am on many Thursdays, the Bureau announces new economic data, such as jobs figures and building approvals. Almost immediately, those announcements prompt Australia’s currency speculators to buy or sell in unison, depending on the difference between the expected data and what was announced.

The former is something any competent foreign exchange worker, such as Kamay, can work out. The latter is something only a Bureau worker could know before the figures are released. Hill, of course, was leaking the figures to Kamay. As a federal government employee, he earned four convictions for abuse of public office, adding fifteen months to his sentence for insider trading.

This banal scheme is anything but a sure thing for a true crime podcast. The pair’s motivations, as detailed by a psychologist interviewed on The Sure Thing, are hardly the stuff of psychodrama. Kamay had suffered early career disappointments and faced the Pavlovian pressures of the NAB trading floor. Hill had recently broken up with his girlfriend and found Canberra dull.

Their crimes were also mundane in their implementation. Hill snuck his data out of the Bureau on a scrap of paper. Kamay furtively traded on his smartphone in a toilet cubicle at his bank. Nor were they criminal masterminds. They both bought burner phones in others’ names (earning them convictions, but no extra jail time, for identity theft). But they sometimes forgot to use them. Anyway, each had spoken to others about their plans at one point or another. Kamay sometimes traded as “The Wolf of Wall Street.”

Worst of all for the podcasters, the crime lacked a compelling victim. When Kamay and Hill pointed out at their sentencing that their trading was barely a drop in the ocean of a currency market in which some $160 billion is exchanged every day, the judge responded, “While it may not be possible to point to any particular loss made by an identifiable victim, insider trading is not a victimless crime. Apart from harm to the market and public confidence, in this case there were counter-parties to each of your trades; they themselves had to enter into other transactions to try to cover their own positions.”

The “market” and nameless traders are obviously no match for the victims of homicide, assault or fraud that are the usual subject of true crime podcasts. Which is presumably why podcast host Angus Grigg and producer Lap Phan plumped for a different, more sympathetic victim: Kamay’s partner in crime, Chris Hill.

Christopher Hill’s alleged victimhood is mostly a factor of his partner in crime’s advanced villainy. On his arrest, Hill learnt that Lukas Kamay had broken their agreement from the get-go. The same day he opened an account for their joint bets at Pepperstone, he opened a second one where he made larger bets without Hill’s knowledge.

Not only did Kamay cut his partner out of the profits from his second account, but his actions also exposed Hill to a much greater risk of detection. To ensure that no one noticed their run of wins, the pair had agreed to limit the amount, consistency and frequency of their shared bets. But Kamay ditched these protections in his second account, running up nearly $1 million from twelve bets over five months and losing just a single bet.

Kamay’s actions supplied The Sure Thing not only with a villain but also with its hero. Pepperstone’s head of sales, Joel Murphy, started keeping a close eye on a new client who had suddenly become the firm’s top trader in a single quarter. Two months later, after Kamay correctly called Australia’s worst jobless figures in a decade, making half a million in minutes, Murphy turned private investigator.

Murphy’s detective tools were simple: social media (to learn that one of Kamay’s friends worked in Canberra), Google (to learn that the friend had worked at some point at the Australian Bureau of Statistics) and his phone (to pose as a student researcher and suss out Hill’s current role).

Less than a week after Kamay’s first big win, Pepperstone reported its top trader to the corporate regulator, ASIC. The next day, so did another broker, AxiCorp, where Kamay had recently opened a third account, making $600,000 off just three trades, mostly from the same February figures.

The podcast’s middle episodes follow the eleven weeks of the resulting official investigation. Operation Leith was a joint effort by the federal police and the corporate regulator — snooping on bank accounts, tapping phones and planting bugs — using up to eighty officers and the full array of federal police powers.

Operation Leith’s officers were even the first to learn that Kamay was planning to buy one of the renovated, furnished apartments from the seventh season of The Block, and The Sure Thing includes an interview with Alisa and Lysandra Fraser, the creeped-out ex-cops who grimly honoured a promise to be Kamay’s VIP guests when he celebrated his purchase of their South Melbourne flat.

The series also features interviews with three of Operation Leith’s officers: a cop (who corralled the agencies into a joint investigation), a member of the federal assets confiscation squad (who followed, and eventually seized, Kamay and Hill’s profits) and an ASIC officer (whose star turn was finding a burner phone that was tossed out of the window during the arrests).

But The Sure Thing doesn’t cover an investigative detail reported by the Daily Telegraph the following year: Pepperstone boss Owen Kerr’s “first instinct was to close down [Kamay’s] account but once he reported it to the Australian Federal Police they urged him to keep the account open.” That is, the national police and corporate regulator decided to let Kamay continue his trades.

It’s easy to see why. The pair’s use of paper and burner phones was enough to stop the snoops learning what information was being leaked. Worse still, there was nothing to see in the pair’s bank accounts: Kamay wasn’t transferring a share of wins to Hill electronically. (It turned out that Kamay was paying just a fraction of their joint winnings, in cash instalments.)

So Kamay’s wins continued. His largest — $2.5 million in a single bet, covering the likely price of the Frasers’ apartment — occurred on day twenty of the investigation, when labour force figures rebounded from their February low.

Eventually, the police placed cameras in the pair’s workplaces and, when building approvals and retail trade figures were announced on consecutive days in early April, at last discovered Hill’s scrap of paper and Kamay’s toilet break. In fact, Kamay lost both his bets that week. That may be because he was starting to fret that the police were onto him. Kerr told the Tele: “He was worried the money was not moving quickly enough — unaware that the delay was because the team at Pepperstone Financial were contacting the AFP for permission to let the trades go ahead.”

The trading companies were right to be nervous. After all, they were knowingly participating in — and still presumably providing leverage for — Kamay and Hill’s suspected insider trading. The Australian Bureau of Statistics likewise continued to give their possibly rogue employee access to sensitive market data. And ASIC and AFP officials stood by as Kamay bid on The Block using likely illicit funds and put down a quarter of a million deposit (later earning him a conviction for money laundering).

Sacking Hill, locking Kamay’s account or stopping the auction bid would have alerted the pair before Operation Leith could prove their crimes. But were there other options? Could Pepperstone and AxiCorp have simply pretended to make Kamay’s trades, with the federal police crediting his account accordingly (while poised to stop any big withdrawals)? Police investigating other hard-to-prove crimes often do something similar, for example letting detected drug importations continue using something harmless, such as baking soda.

Instead, Kamay continued his trades for seventy-eight days after he was reported to the regulator. These included his second huge win on day fifty-five of the investigation, relying on Hill’s access to the Bureau’s construction data to earn $2 million.

When the story of Kamay and Hill’s crimes eventually broke, the ubiquitous hook was that theirs was Australia’s “biggest insider trading case.” But none of those reports, including The Sure Thing, pointed out that the lion’s share of Kamay’s trades — 80 per cent of his $7.5 million haul — occurred under the gaze of Australia’s corporate and police watchdogs.

This is no entrapment story. The investigators’ decisions don’t detract from Kamay’s villainy. Indeed, the oblivious insider trader opened a fourth account — his most lucrative — on the same day Operation Leith began, using it to make eight trades totalling $6 million. Those trades were rightly regarded by his sentencing judge as his most heinous, because by then he was “trading with absolute confidence in the value of the inside information.” That is, as an earlier judge put it, insider trading is at its worst when winning is “a sure thing.” Kamay received five years’ imprisonment, two-thirds of his total prison sentence, for those eight trades alone.

But the fact that investigators let those sure bets happen complicates the official line that the battle against insider trading is fought to protect the crime’s actual and metaphorical victims. Police investigating other crimes typically prioritise preventing harm to others over catching criminals, and if they don’t the courts take a very dim view. In 2008, the NSW Crime Commission allowed six kilograms of imported cocaine to be sold to Sydneysiders while investigators built a case against a Mr Big. The High Court ruled that the commission itself broke the law by allowing that cocaine to endanger end users’ health.

But the evident concern of Operation Leith’s investigators was to ensure that Kamay and Hill were eventually punished, publicly and harshly. If they had stopped Hill’s leaks or Kamay’s trades early, the pair may never have been tried, let alone convicted. If they had asked Pepperstone and AxiCorp to fake the trades, the blaze of headlines would have been about the less stunning crime of “attempted” insider trading.

That may be small comfort to the innocent investors on the other side of Kamay’s $7 million of winning trades during the course of Operation Leith. In March 2016, the Australian Shareholders’ Association complained that the way white-collar criminal law is enforced “is not always appropriate as the monies go into a confiscated assets account rather than to directly compensate victims.” Of course, some other lucky investors netted the windfall of Kamay’s $1 million in deliberate losses during this same period.

Kamay, of course, couldn’t keep his winnings. Instead, the money became part of Australia’s Confiscated Assets Fund, which swelled from $88 million in 2014 to $96 million in 2015. The largest beneficiary of that fund, which is used to support law enforcement initiatives, is the Australian Federal Police. In May 2016, federal justice minister Michael Keenan approved a grant of $14 million from the fund to expand the AFP’s Fraud and Anti-Corruption centre, a collaboration of a dozen federal agencies including ASIC, the very body that investigated Kamay and Hill.

For how long would Operation Leith’s investigators have let Kamay rack up wins on Hill’s inside information before they finally pulled the plug? We don’t know, because Hill himself blew the pair’s cover on Anzac Day weekend when he forgot his burner phone on a visit to Melbourne. Investigators listened to the pair arrange a meeting on Hill’s regular phone, followed them as they bought new burners at a suburban shopping centre and listened in via a bug in Kamay’s BMW Roadster as Hill was handed his next bag of cash.

Even though they now had all the evidence they needed, the police waited for two more weeks until the next labour force figures were released. This time, Kamay made his worst bet, deliberately losing (and unwittingly depriving the police’s confiscation fund of) nearly $800,000. The next morning, the pair’s homes were raided.

Coincidentally, The Sure Thing’s hero lost his job that same day, made redundant after Pepperstone reviewed its operations. Joel Murphy later sued the firm for unfair dismissal and unpaid bonuses in the Federal Court, with his lawyer noting the lack of whistleblower protections for employees who inform ASIC about client activity. The workplace dispute seemingly ended after a judge ordered the firm and Murphy into mediation.

The Sure Thing chose not to detail these sour notes. Instead, Angus Grigg and Lap Phan opted for a human-scale tale of greed, betrayal, discovery and redemption. The backstory, Grigg explains, started when Clinton Free, a management academic who studies white-collar criminals, introduced him to Hill in 2019. The trio navigated pandemic restrictions until Hill could tell his side of the story.

If the producers were hoping that Hill would publicly vent at his partner in crime, they were disappointed. Throughout the podcast, Hill repeatedly rejects Grigg’s suggestion that Kamay “betrayed” him. Hill doesn’t explain why, but any attempt to deflect or apportion responsibility would have been a bad look. All of Kamay’s trades, whether pursuant to the pair’s joint deal or to his much larger personal shenanigans, were the result of Hill’s leaks. Had Hill simply stopped the flow in early 2014 — when, he told the podcast, he started to get cold feet — neither of them would have been caught.

Grigg and Phan found some interpersonal drama during the 2015 sentencing hearing, when each of the friends said that the insider trading scheme was the other’s idea. Justice Elizabeth Hollingworth accepted Hill’s account, unconvincingly citing Kamay’s deeper knowledge of the currency market. Her ruling may just reflect Kamay’s minimal credibility given his double-dealing. Six years later, the podcast proved her right, locating someone who had heard Kamay float the same idea years earlier.

Hill, once again, denies Grigg’s suggestion that Kamay’s testimony was a fresh betrayal. He was, in any case, fortunate that Kamay sorted his shared deals with Hill and his personal side-deals into separate accounts. That allowed the police and courts to readily distinguish the pair’s villainy. Only Hill had abused his workplace’s trust, but Kamay’s sentence was nearly twice his partner’s.

The sole bright spot for Kamay in his sentencing came as a result of the government’s hardline attitude to confiscating the proceeds of his crimes. Prosecutors insisted that Kamay’s “pecuniary penalty” should equal his total wins, leaving him to wear the $1 million he deliberately lost. He was forced to sell all of his assets, including ones acquired before he started his insider trading, to settle his debt with the police, a disproportionate penalty that Justice Hollingworth took account of in fixing his prison term.

And yet, as Professor Free emphasises at the end of the podcast’s initial run, the pair’s financial and personal punishments would last much longer than any prison sentence. ASIC permanently banned Kamay from providing financial services. Hill explained that, thanks to the awkward gap in his resume after (and lack of reference from) his stint at the Australian Bureau of Statistics, he was unable to find any white-collar work after his release in 2017.

Free asks whether this additional punishment is just, arguing that white-collar criminals, like others, are surely capable of redemption. But I think this is the wrong question. Employers’ refusal to hire known insider traders isn’t a matter of justice, but rather commercial risk management. The better question to ask is whether, given the combined effect of assets confiscation and commercial anathema, the much-ballyhooed tough application of the criminal law is necessary.

The Sure Thing tackles this issue obliquely in its closing episodes, with the obligatory bleak prison saga (where Kamay takes turns as the hero and then the target of other criminals) eventually giving way to the pair’s staggered stints at a minimum-security facility near Beechworth, where inmates spend their time working in the local community. The podcast interviews the president of a local football club, who uses the prisoners, including Kamay, to make up the numbers in his team. The obvious question is what purpose is served by keeping such non-dangerous prisoners (white-collar or not) in Victoria’s swelling prisons.

In her sentencing remarks, Justice Hollingworth intoned the official view that “deterrence” — especially of others — “has a central role to play in white-collar offending” and that “it is self-evident that the longer the sentence, the harder the bite.” That oft-repeated mantra is shared by virtually no criminologists, who instead think that most offending is done by people who don’t expect to get caught at all. Notably, the doubling of insider trading maximum sentences in 2010 seemingly did nothing to deter Hill and Kamay.

I love what The Sure Thing has done with the podcast medium. While true crime podcasts have covered white-collar crime before, I’m not aware of any that has focused so humanely on a white-collar criminal. Indeed, few focus humanely on any criminals.

But this focus on individual offenders and investigators comes at the cost of dealing with the many official decisions that surrounded Kamay’s and Hill’s crimes. These include decisions made during the investigation (such as letting their crimes continue for nearly three months) and decisions made afterward (about punishing them and dealing with their illicit profits), as well as other official decisions made before their crimes were committed.

The most surprising of all omissions, to me, is any examination of the choices made by the Australian Bureau of Statistics. One choice was to declare itself a victim of Kamay’s and (especially) Hill’s crimes. At the sentencing hearing, federal prosecutor Robert Bromwich offered just one victim impact statement, but it wasn’t from the market, a losing currency trader or even the three people (a housemate, a job applicant and a bank customer) whose identities Hill and Kamay stole.

As Justice Hollingworth told Kamay and Hill in court, drawing on the Bureau’s victim impact statement, “Confidentiality of the information provided to, and held by, the ABS is critical to its proper functioning. Conduct such as yours can be very damaging to an agency like the ABS, particularly to its public reputation. Your actions have caused the ABS to spend considerable time and money reviewing the integrity of its computer systems, and undertaking further staff training. The ABS also arranged counselling for those members of staff who were having trouble dealing with the nature and seriousness of your betrayal of trust.”

She didn’t mention the statement again. Perhaps she wasn’t impressed.

I sure wasn’t. The Bureau has no more cause to bemoan Hill’s “betrayal of trust” than Hill has about Kamay’s. After all, it was the Bureau that decided to give Hill advance access to sensitive market information, not just after it learnt of his possible misuse of it, but also before that, when it knew little about him. Worse, even though his main job was to analyse labour force figures, and sometimes building data, Hill was nevertheless given inadequately supervised access to two other sets of market-sensitive data.

Indeed, a review published two months after the arrests found that, despite a supposedly strict “need to know” policy, Bureau employees’ access to the market-sensitive data had been expanding for years, a product of slackening standards and the exigencies of managing a large, spread-out, multitasking and often shifting workforce. Some 340 Bureau staff had electronic access to at least some market-sensitive figures. And open-plan offices meant that still more Bureau employees could readily see data left visible on a desk or screen. On one view, Hill’s crimes (and Kamay’s disregard of the pair’s precautions) did the public a significant favour by revealing the potential gap between the Bureau’s promise of confidentiality and the reality.

I’m not sure the public’s concerns would be assuaged by the auditor’s recommendations. Belinda Gibson, who had recently stood down as ASIC’s deputy director responsible for insider trading, said that the Bureau’s “need to know” lists should be reviewed (and, indeed, viewed) and that employees’ access to sensitive data should be watched, both retrospectively and in future. But she also repeatedly said that trusted employees (like Hill) can always find a way to misuse any data they can access.

Her solution: amplifying the Bureau’s self-described “strong culture.” She recommended that the organisation add modules about not divulging market-sensitive data to its existing internal messaging, contracts and training, something it seemingly had not done previously. And she also said that Bureau employees should declare their financial situation yearly and refrain from short-term trading. None of these measures would have made the slightest difference to Hill. Neither, of course, did the criminal law, which the Bureau cited as its principal means of preventing employee misconduct.

It seems to me that some other, more onerous options could plausibly prevent crimes like Hill’s and Kamay’s in future. One approach could be to separate the key data between different groups in a way that makes it less usable by any one individual. Another, taking a leaf from Hollywood, is to issue workers with multiple sets of data for analysis, some fictitious, with almost no employees knowing whether the data they are working on is the correct set. The risk of misuse would still exist, but it would be more confined, in terms of people and time, and, crucially, much less of a sure thing. Measures like this are expensive, of course, but the alternatives are grim.

In its closing moments, The Sure Thing nods to the futility at the heart of its story, when podcast hero Joel Murphy returns in a new role. “I probably felt a tinge of guilt,” he says, after learning of Kamay’s betrayal of Hill and Hill’s current employment troubles. The podcast’s denouement, a redemption of sorts for him and Hill, is when Murphy offers Hill a job in the trading company he now manages.

The kicker is Hill’s new role: risk management, which includes analysing whether clients are engaging in insider trading. Hill knows what to look for all too well: a series of big wins on improbable bets by someone with a traceable connection to the right public servant. The problem is that Hill knew all of that in 2013, which is why he and Kamay agreed to take precautions. Are there other public servants, in the Bureau or other roles that have access to market-sensitive information, who know the same, and are successfully managing the risk of detection? I reckon it’s a sure thing. •