Tom Hardin visits Truth Lies and Coverups. He did some insider trading, got caught by the FBI and instead of going to jail right away, wore a wire for them which resulted in multiple arrests. They gave him the code name TipperX. Listen to find out the details—it’s the stuff movies are made of. Enjoy!
VIDEO COMING SOON!
Traci Brown: Tom, thank you so much for joining me today. I’m just thrilled to get to meet you.
Tom Hardin: It’s a pleasure to be here, Traci. Thanks for having me on the podcast.
Traci Brown: Oh yea. Now, you’re a little – I’m just so fascinated because you have like a code name and everything.
Tom Hardin: I do. I do. TipperX, formerly known, really known as TipperX about 10 years ago. I’m sure we’re going to get into that.
Traci Brown: Oh yea. Now the FBI gave you this. Was it your name, like a code name, or was it like a case file? What’s the deal?
Tom Hardin: The FBI gave me the name. My company’s name was Lanexa, and so L-a-n-e-x-a, and so I learned later that’s how they pulled the X for TipperX. But it wasn’t me naming myself. I had no idea I was TipperX. I actually saw it in the Wall Street Journal. It took me a few minutes to figure out, oh my God, I think I’m TipperX, and so they confirmed that.
Traci Brown: Oh my God. Oh, that just gave me goosebumps. Okay, so let’s get into what happened because you had kind of a situation go on. You were a hedge fund guy.
Tom Hardin: Right. Right. So I grew up in the suburbs of Atlanta, the first in my family to attend an ivy league college in the late 1990s. I applied to Wharton undergraduate, University of Pennsylvania, a prestigious school, got into the hedge fund industry, as many do out of the business schools. I graduated and I knew pretty much from the beginning of my career when I started that there were people in the industry trading on illicit inside information. If people aren’t familiar with that, there is legal insider trading, which corporate officials all the time have stock selling plans, but there is also illegal insider trading, so the information you’re trading on has to have three elements.
It has to be nonpublic, so you can’t google it and find it.
It has to be something that would move the stock price, so you think about a corporate quarterly earnings announcement that happens four times a year, or a corporate acquisition where a company gets acquired and the stock is up. That is nonpublic.
It has to be material to the stock price, so if I were to ask my local Starbucks in western New Jersey, what are your sales this quarter? It’s not going to move the stock. If I fly to Seattle and play golf with the CFO and he says, this is our earnings next quarter, that is material.
Traci Brown: Got it.
Tom Hardin: It has to be stolen from the company, so the crime is actually the information is stolen from the company. It’s sometimes hard for people to realize, like alright, I get it’s unfair, but why is it? I mean, it’s a felony, but why? It is the fairness with theft, the information of the company is stolen, but it’s sometimes hard for people to see. Well, I know with Ponzi schemes, your life savings is stolen, but insider trader is a little bit more nebulous as to who the victim is. That is some of the psychology we can talk about. I knew this was going on. I didn’t feel like I needed to do it. Then one day I got a tip from another investor about a stock that was going to be acquired in a few weeks.
Traci Brown: Now wait, wait. You skipped over some stuff. Okay.
Tom Hardin: Yea.
Traci Brown: Because I watched some of your other videos and read a little bit, things like that, and so it seemed to me that you . . . were you like an analyst for the hedge fund?
Tom Hardin: Yes. I was the junior employee. It was a two-person firm. I had a senior partner about 15 years older than me. I was the junior person.
Traci Brown: Got it. And then you started going to conferences.
Tom Hardin: Right.
Traci Brown: And hearing, like realizing how much you’re making versus how much other people are making. It sounded like to me, like hearing tips at the bar, people talking. What really was going on for you, because you’re how old at this point?
Tom Hardin: Yea. I’m 27, 28, 29, so in the first decade of my career. I knew in the beginning even at 23 years old, when I just started, this was going on. There were people five to seven years older than me, as you said, blatantly getting this information either from these CEOs and CFOs that these tech companies that we trade, they were actually sometimes investors in the hedge funds and the people trading the stocks. You think about, okay, a conflict of interest, like hello, this is the ground for insider trading to happen. That was going on. I knew I wasn’t a part of that group. Again, I never felt I needed to be part of that group. I was always a good, legitimate stock picker. I had that good reputation. I knew it was going on. These guys were making millions of dollars. The most famous individual was Raj Rajaratnam. If people aren’t familiar with insider trading history, they can just google his case. I was a part of building that case later. So, I knew it was going on. One day my boss came into my office and said, we have to start making money every month rather than looking out longer term, and so I started looking for more shorter-term opportunities to make money every month. If a goal goes from long term to short term, the opportunity to do something bad certainly increases. That sort of sets the stage. It’s not really, are you a good person, or are you a bad person? We all could be good or bad, depending on the incentives and the environment.
Traci Brown: Oh yea, depending on the day.
Tom Hardin: Yea.
Traci Brown: Yea. Okay, so you get this pressure to start making more money.
Tom Hardin: Right.
Traci Brown: Do you want to share, like what’s your salary like at this point? You can give a ballpark.
Tom Hardin: Salary is probably $150,000, but really the upside in this business is you get a piece of the profits in the firm. Living in New York City, it is a standard salary for somebody starting in their career, but really the upside and the reason these businesses are so lucrative is that hedge funds get to keep 20% of they make for investors. If you manage $100 billion of high net worth family or institutional endowment money, and you make them 30%, they keep $24 million and you get to keep the $6 million, the 20% of the profit. It immediately becomes very scalable and very lucrative. Literally the highest, the wealthiest people in the world, other than the tech entrepreneurs and founders, are also the hedge fund managers.
Traci Brown: Got it. Got it. So, you get this pressure, and then what happens? Because wasn’t there like a series of events that kind of unfolded? Tell me about that.
Tom Hardin: There was the pressure to make money every month. Okay. Basically, the untold message there from the boss was kind of like, don’t tell me how you’re going to do it, so the ambiguity in that message is a major thing for fraud to happen. If you’re getting an ambiguous message to do what it takes, but don’t tell me how you’re doing it, that sets the stage for this whole thing to happen.
Traci Brown: Now, what did he say? What did he say to give you that? Was there a line? Was there like a quote?
Tom Hardin: It was really, we have to make money every month. We were investing three to five years, the longer-term horizon, and now we have to make money every month. Basically, he didn’t say this, but his body language to me, him being the expert, was sort of like, so I’m going to do what I have to do. It was basically I think it was what was not said, sort of like . . .
Traci Brown: Got it.
Tom Hardin: So, anything goes. So, a few months later a woman who I knew in the industry, another investor, called me and said, hey, Tom, you paid me a lot of money over the last few years on your great stock ideas. I have something for you. She said, this company was going to be acquired next week on this date, at this price, by this firm. There was nothing gray about that. If people remember the movie, Wall Street with Michael Douglas, hey, Blue Horseshoe next week, it literally fell in my lap. This illegal, inside information I could trade fell in my lap. I wasn’t looking for it. I wasn’t trying to break the law at this point. I went to work, and she calls, and it falls in my lap. I think . . .
Traci Brown: Now wait, but she had to get that information from somewhere. What was the key to the information there?
Tom Hardin: The tipping chain was her cousin had a roommate who was an analyst at Moody’s Corporation.
Traci Brown: Wait, wait. Her cousin had a roommate who was an analyst. Okay.
Tom Hardin: All these changing shapes, you would have to like pull the whole chart up. Her cousin had a roommate at the Moody’s Corporation. Moody’s rates bonds, not to get too technical for people, but they say it is this investment rate which is higher quality, but they rate bonds and usually bonds are issued by private equity firms. It is the debt to buy companies. This guy at Moody’s has all this inside information on his clients. I know this company is going to buy this company. He’s never supposed to share this type of information.
Traci Brown: Right.
Tom Hardin: And he shared it with his roommate, young people, which happens a lot. You’re in your 20s where people are roommates. Another roommate is talking about something and you kind of listen in. He heard it and called his cousin, this woman who I knew. That’s how it all sort of came together.
Traci Brown: Then why did she call you? Why didn’t she act on it herself?
Tom Hardin: Well, she acted on it herself. She put all of her brokerage account in this stock, which is sort of like, oh my God.
Traci Brown: Her whole brokerage account.
Tom Hardin: That’s very nefarious. Yea. There was no slippery slope or like I’m going to do a little bit. Her whole account was in there. She had called me, I think, to pay me back for the good recommendations I had given her over the years. It’s often in these crimes, a friendship case, so sometimes it’s not really clear why this person is giving this information. Sometimes it’s just to help a friend out, nothing more than that. She gave it to me. I didn’t trade on it. I called another friend that day who worked at a trading firm, and he was losing money that month. He said, dude, are you hearing anything out there I can trade on? In that moment I said, you know, I talked to this woman this morning who said this company is going to be acquired next week, just pausing right there, if people aren’t familiar with the law, I could not be charged with insider trading just for sharing this nonpublic information with him. I haven’t even traded yet. Then he shares it with somebody at his firm. They all buy the stock. They’re very excited because it’s going to happen in the next week. He calls me and says, dude, did you buy some? I hadn’t yet, but as the junior partner at my firm, I could buy a stock in our portfolio and not have to talk to my boss as long as it was less than 1% of all the assets we managed for clients, so if we managed $100 million, as long as it was $99,999,999, I could actually buy that stock and not have to talk to him, kind of like a small position. Usually when we would buy stocks, we’d buy a little bit, you do some more research, if you like it, you buy more.
Traci Brown: Sure, sure.
Tom Hardin: That was a starter position. I can tell you, if people are familiar with the fraud triangle, need, opportunity, rationalization, I certainly rationalized why I did it. I felt like everybody else was doing it. I’m just doing it small. These guys, Raj Rajaratnam, those people are making millions. I’m doing it small. I would never be caught because I’m churning small. If these guys aren’t being caught with the millions of dollars, then why would they ever even look at me? I never considered the idea of every being caught.
Traci Brown: Yea.
Tom Hardin: I still thought I was a good person, like, I can place this trade. I was still volunteering at my church, the soup kitchen, all that. Sometimes we have this thing in our life, we’re doing 99% good, we kind of cut ourselves some slack and we can do something bad on this side. That was sort of my thinking. I’ve never really done anything bad in my life other than speeding. In college there was Napster, which I’m dating myself now.
Traci Brown: Oh yea. Napster. You bet.
Tom Hardin: Free songs every week. Today when I talk to people in their 20s they’re like, what are talking about?
Traci Brown: I downloaded hundreds of songs on Napster.
Tom Hardin: We’re all guilty of something.
Traci Brown: Yea.
Tom Hardin: It’s not the same as insider trading, but it is the same mindset. It’s not like a Bernie Madoff, like oh my God, I’m going to have this multibillion dollar fraud. I walked home having committed a felony.
Traci Brown: Okay. Wait a minute. Let’s back up. You do this. Are you thinking, I’m super cool, or are you thinking, oh, crap, what’s going to happen next? Because you must have had both going on. What was really in your mind?
Tom Hardin: Great question. I rationalized. What was I really thinking when I pushed the button to buy this stock? That’s all it takes. That’s the crime. You just push a couple keyboard buttons and you’ve committed the crime.
Traci Brown: That’s it. Yea.
Tom Hardin: I felt at the time of the first tip, I didn’t really know if this was true. The woman that called me was always full of rumors. Hey, I’m hearing this and this.
Traci Brown: Oh, okay.
Tom Hardin: Sort of like BS. Now it does sound, this date, this price, next week, that sounds pretty specific. The first tip, I didn’t really know if it was a rumor or what, but I figured I would just take a flyer. I’m renaming my behavior again there. I’m not saying I’m insider trading. I’m like, I’ll just take a little flyer. That’s what we called it if you buy a small amount of stock. With fraud sometimes a person uses these euphemisms to say I’m taking a flyer. But really I felt, when it actually hit the news wire a week later exactly as she said, I’d love to tell you that I freaked out and told my boss, holy you know what, like I think I just really . . .
Traci Brown: Really screwed up. Yea.
Tom Hardin: I didn’t tell him anything because I figured if he had a problem with it, again going back to that first meeting in my office, he would have fired me or said something. Nothing was said. I almost felt like, I hate to say it, but truthfully, I felt like an adrenaline rush.
Traci Brown: Yea.
Tom Hardin: Like oh my God, I’m now part of this group of these individuals who are a little bit older than me in my career who are doing it. I went to the conference the next week, and I’m like, I knew about Kronos, and they were like, no, you didn’t, like you’re not part of our group. I’m like, and I knew about the next one. And they said, come be a part of the group, so it was about being part of that in group I think for me in my 20s. I didn’t have the self-awareness that hopefully I have now in my early 40s. I was so impressionable by these people.
Traci Brown: Wow. Okay. So you make it into the in club. I get how that goes in associations. I get it. Yea. You kind of want to be in the crowd. Now, so you did like one trade, and then how much did that net? Do you know?
Tom Hardin: Yea. So the one trade . . . It was four trades, so it happened . . . I remember the total number for the four trades. It happened the exact same way. She would call me. I would place the trade. The boss says nothing. They were all these less than 1% positions. The firm made $1.2 million for our investors. We managed $100 million of client money. We were up 31% that year, so it literally added one more percent to our return, in an already great year, 30% in any year is great.
Traci Brown: Yea, that’s great. Yea.
Tom Hardin: So it added one more percent. It’s sort like, I wasn’t swinging from the fences. What’s the point of even doing it? So often with a fraud, it’s not the sort of headlines we see from time to time. It’s often the small, $26,000 here or there, and so I’m the $1.2 million, my take as the junior partner, going back to what’s supposed to be, the very lucrative part of my compensation of doing this was $46,000 on these trades. That’s really, Traci, like the price of a professional suicide at 29.
Traci Brown: Oh my God, that’s nothing, I mean . . .
Tom Hardin: Yea, $46,000. People are shocked. They’re like, I thought TipperX was like making millions. Maybe that’s TipperY, but TipperX didn’t make more than $46,000 and it’s like I never thought about the amount of money I was making or that I would ever be caught. It was just I think being part of this in group, being very impressionable, having no self-awareness of myself that I sort of wanted to please people all the time, be liked be people. So I was now part of the in group, and of course, I can look back foolishly now, that was very foolish 10 or 12 years ago, but at the time I felt like, well these guys were blatantly doing and I’m just part of the group now.
Traci Brown: Yea. It’s just what’s going on. So, you do the first one, but you did four. Does it get easier as you go? How does that . . . ?
Tom Hardin: Yea, it does.
Traci Brown: Are you thinking? I’m home free, this is nothing, this is just how things really work. Like what . . . ?
Tom Hardin: Good question. I did the first one, a little bit conflicted on it. I didn’t buy the stock when she told me. I waited a few days. A buddy calls me. I rationalize it. Then when it happened, the boss said nothing, and those guys are like, you know about the next one too? The second, third, and fourth, again, I hate to say it, it was much easier. I wasn’t like losing sleep at night. I wasn’t waking up, like oh my God, I’m going to get busted. I didn’t think about it because we did thousands of trades a year. If there were like four bad ones, it was almost like bad debt expense, right.
Traci Brown: Yea, yea.
Tom Hardin: Just sort of that is part of doing business. I didn’t escalate it so it was always these small trades. So the four trades happened and I didn’t really think twice about it. It was almost like a normal part of the business.
Traci Brown: Now with the tips, was it the same girl tipping you off?
Tom Hardin: Yes, it was the same person all four times.
Traci Brown: Talking to Moody’s. Right.
Tom Hardin: She actually asked for a cash payoff.
Traci Brown: Oh!
Tom Hardin: Literally one day, so I guess by the third time, she was like, alright, you sort of have to reciprocate to the individual who is giving her the information or compensate this individual. So I’m literally one day going no LaGuardia. I had a conference in California where she lived. I have the $15,000 that she wanted strapped to my chest and in my pockets.
Traci Brown: No!
Tom Hardin: Or the security machines would get hung up on the cash. I’m literally walking through the TSA. I can’t believe I was so brazen. It never went off. Got through it. Went to the restroom.
Traci Brown: Now wait. Did you duct tape . . . ? Hang on. Back up, back up. Did you duct tape it to yourself? How does one go about learning how to strap cash to them? What goes on?
Tom Hardin: I really just stuck it into my shirt, tucked my shirt in, so I maybe put on 40 pounds or whatever, and then put it . . . I remember it fitting in my shirt, in my back pocket so that money was in the hundreds, it kind of fit that way. I put my carry on without the cash in there. That went through the scan. I walked through the machine and nothing went off.
Traci Brown: Were you just sweating bullets?
Tom Hardin: I was. Yea. It’s hard for me to get back to like, what the heck was I thinking? It’s one thing to answer the phone, place a trade, rationalize it. It’s a whole other thing when she asked for the cash payoff. I could have said, no, I’m never doing this again. That’s crazy.
Traci Brown: But you didn’t.
Tom Hardin: I called my friend who I had tipped before and said, can you get the cash together so I can pay this individual who tipped me? So it wasn’t out of my accounts or anything like that.
Traci Brown: Oh.
Tom Hardin: Go through the airport, do this, and there is actually two TSA agents at the gate of my flight searching carry-ons, which I’ve never seen happen.
Traci Brown: I’ve never seen that either.
Tom Hardin: I thought, oh my God, they obviously saw me or something, so here it goes. They stopped me. I’m one of the every 10 passengers they’re stopping to search their carry-ons. They went through it. I had it in bank envelopes. They gave me back my carry-on. They said, have a nice flight.
Traci Brown: Oh my gosh. Here’s the deal. Here’s the deal with the TSA. Because I do investigations from time to time, like private people call me and stuff. I don’t know everything. I know a lot of stuff when it comes to body language and detecting lies, but every now and then I’ll get stumped and one of the people that is on my team that I call when I need help, she’s TSA, and so they are watching us. She is a phenomenal body language expert. Man, that you made it through, either she was off that day or you’re good.
Tom Hardin: I just thought maybe I’ll fly to San Francisco so maybe my cover is going to be I’m going to Vegas. I’m a high roller, I need $15,000 for that, which again, it’s a red flag, but they didn’t say anything. They touched the cash envelopes and I got in the plane. I’m sitting in my seat in the plane thinking at that point, my God, what the F am I doing? Oh my God. This is crazy. It’s like one thing . . . it just escalated. So I was like the frog in the boiling water where . . .
Traci Brown: Yea.
Tom Hardin: I know these guys are doing it. The boss says this. She calls me. You kind of watch that movie, like okay, here is this guy going to the airport. It didn’t start there, but it’s the frog in the boiling water. I’m the frog.
Traci Brown: Oh my gosh. Okay. You get out there. You pay her off. Take us down the line. Then you had some run ins with some authorities. What happened?
Tom Hardin: Yea. I paid her the cash. I said I’m never paying . . . If this person wants cash again, I’m done with these. It would be just three trades. She called one more time and she said, no, no cash for this, I understand. So it was four trades. That was September of 2007. In July of 2008, so almost a year later, July 8, 2008, a summer morning, I lived in Manhattan on Midtown West, it’s right near the theatre district, leaving my apartment at 6:30 in the morning to go drop off my dry cleaning, and the FBI agent stopped me on the street. Like if anybody’s seen a crime show, you’ve seen this scene with the FBI, the ones were, hey, come sit down with us, we have some questions.
Traci Brown: So there were two of them?
Tom Hardin: Two of them, a male and female, dark suits, and when they stopped me and I saw their wallet, I immediately knew. I just knew what it was about. It wasn’t like, what are you guys here for? It must have been on my conscious even though I wasn’t actively thinking about it. Like I knew at that point. I sat down. They were like, we know about your four trades. You know that you were just down in Atlanta visiting your baby nephew for his baptism this weekend.
Traci Brown: Oh.
Tom Hardin: They had tracked me for a while I think and like, okay, we can approach this guy this way. Sometimes they’ll just sort of be in the windbreakers in the hallway of your apartment, knock on the door and arrest you, but they approached me this way on the street. They said, do you know if there is illicit trading going on in the industry, Tom? I was sort of like, of course, it’s going on. Like if I knew . . .
Traci Brown: So you didn’t act like you didn’t know what was going on?
Tom Hardin: I didn’t say . . . you know a more sophisticated person would be like, are you going to arrest me or can I have my card? And I’ll talk to an attorney. But I wasn’t sophisticated at all. Yea, I know it’s going on. Yea, I did it. I think they were kind of shocked. They were like, okay. Alright.
Traci Brown: (Laughing).
Tom Hardin: It was almost like the Catholic guild, the confession.
Traci Brown: Yea, yea.
Tom Hardin: Confession time, not with the priest but with the FBI. I told them, yea, I did this. In fact, she asked for this cash payoff. They were kind of surprised. I’m like, I didn’t even know they did that. They were like, keep going about that.
Traci Brown: Uh-oh.
Tom Hardin: I always tell people today, if the FBI approaches you, just take their card and talk to your attorney.
Traci Brown: Oh, who knew?
Tom Hardin: I thought I was guilty.
Traci Brown: File that away.
Tom Hardin: They said, can you help us build some of these bigger cases? I said, I guess, but I don’t even know what that means. A few days later I called them. I said, I haven’t talked to an attorney. They actually told me not to. They said, we will let you know when you can do that, which is kind of . . .
Traci Brown: That’s not quite . . .
Tom Hardin: I don’t know, but that’s just the point of they have to build their cases and do what it takes to go up the career ladder there, and so I’m just another rung on the belt, which is just how it is. I don’t hold that against them really, but I should have known I could talk to an attorney. I didn’t. I called them and said, okay, I’m ready I guess to “help you” but what does it mean to help you? They said, you are going to have to wear a body wire. It wasn’t like strapped to my chest. It fit in my front shirt pocket. To get people of interest in the industry, who they were interested in, in these face-to-face conversations about a time in the past they had insider traded. We can talk about how I was coached to do that.
Traci Brown: Yea, yea. What did they tell you?
Tom Hardin: The setup was they weren’t giving me names of people that they felt were guilty. They said, Tom – it was a one-way street – Tom, who do you think are the worst actors in the industry? And so I went back to my apartment, made a list of 10 people who weren’t really much older than me. I’m in my 20s. These were 40-year-old, multimillionaires, big guys. I said I think this guy’s business is just insider trading. This is all he does with stocks. That’s what I’ve heard. I don’t know him that well, so how am I going to wear a wire? They said, build relationships. Get to know them. Mention my past four trades to them. I’m a young buck. Play up to their ego. Hey, I’m wearing this wire so it’s a recording device. I would rehearse it with the FBI. Meet a person who I felt was of interest to them at these conferences. It’s a little bit startling. Why is this kid asking me about times I insider traded?
Traci Brown: Yea. How do you start a conversation like that?
Tom Hardin: Basically, I was coached. The FBI knew about a situation that looked like insider trading with the individual, or I may have known them by their reputation because at the time certain traders at the time were very good on certain stocks based on where they got their sources of information.
Traci Brown: Okay.
Tom Hardin: So I said, oh, I hear you’re good at trading Apple stock around their quarterly announcement. Tell me, if you were ever asked about why you traded Apple around the quarter, what would you say? To get the person to create a cover story of what they would actually say, and so I guess that’s enough for the FBI to be like, alright, we could maybe bring a case. It’s a little bit entrapment.
Traci Brown: Yea.
Tom Hardin: What would you say? – I’m recording it. Usually there is a pause, like if I am asking you a pointed question, especially doing what you do, you would probably not answer. They look at me like, why is this guy who I don’t know that well asking me such a pointed question? I would eventually fill the silence because it was so awkward. I felt like this wire is 10 feet tall next to me.
Traci Brown: Yea. Silence is hard. Oh.
Tom Hardin: There is silence. They’re looking at me. I’m like, alright, how about we change the subject? The FBI, they were listening to it after I recorded. I wasn’t contemporary listening.
Traci Brown: You didn’t have an earpiece.
Tom Hardin: You’re doing such a bad job. You have to let the person talk. Of course, I’m like, it’s my first time doing this, guys, alright. It was sort of like, there was a female and a male. The male was sort of the bad cop, the female playing the good cop, hey, you’re doing okay. That was their psychological play with me. This was how they did it. Eventually, I got people talking like all the time. Eventually people trusted me, started talking to me about a list of trades. I had no idea this was going anywhere. Like the FBI would hear it. They wouldn’t even say, good job or anything. They just stopped saying, bad job. I did this like 47 times over two years, recording these conversations and not hearing any feedback. Then in the end of 2009, October 16, I turn on CNBC and there are like 20 people in handcuffs. I’m actually, my wife and I, my wife had just given birth to our first daughter. I’m in the hospital. Turn on CNBC. Oh, what’s going on? I talked to the FBI that day. They said, this is all your work. So, it was sometimes people who I was one off from. The big person in handcuffs, like Raj Rajaratnam, wasn’t somebody I got into a discussion with, but it was because of my work, I helped lead them to other people, the other people who led to the big confession. They said it wouldn’t have happened without me. It was like people getting arrested nonstop on CNBC, like all morning in October 2009. I was like, oh, this is actually happening.
Traci Brown: Wow. Okay. When you see this, you’re in the hospital. Like what happens next? Are you like, they’re coming for me now, or did they give you some kind of immunity?
Tom Hardin: Oh no. That was October 2009. They told me it was time to hire an attorney now. So I called an attorney. I basically googled, who was Martha Stewart’s attorney because that’s all I knew about insider trading.
Traci Brown: Yea.
Tom Hardin: I didn’t really know about it. He was very expensive, so he referred me to somebody else. I wasn’t going to trial so the legal fee was going to be much less. I was going to plead guilty. I called an individual and said, hey, I’m TipperX in these cases. He was like, okay, but who was your attorney in the last two years? I said, you’re the first I’ve spoken to. He was like, you’re supposed to talk to me the first day the FBI approached you. I said, you know what, it’s my first time doing this. Again, it’s sort of like, I just followed their orders. That’s how they talk to you. I plead guilty in 2009 in December. I was supposed to be sentenced six months later, and I wasn’t sentenced for six years until 2015 because they had to arrest and prosecute everybody I helped them with so I could get credit for that. So it was almost like, if I had said the first day on the street, I’m not going to help you, I’ll go to prison, I would have been through the system quicker I guess. I probably would have lost my marriage. Six years to be sentenced, and I was finally sentenced to no prison because of my cooperation and because it took six years, there was no immunity. I’m still a convicted felon unfortunately. No matter how much I do these talks, it’s not going to go away.
Traci Brown: Right, right. Six years. What did you do for six years?
Tom Hardin: Yea. It’s very tough because TipperX came out in January 2010. The Wall Street Journal had figured it out. TipperX is Tom Hardin. So nonstop, people were coming by the house for a quote. I was a stay-at-home dad with my youngest daughter. It’s a 24-hour new story, so that went away, but really, I’m applying for jobs. I’m trying to get like back office finance spreadsheet . . .
Traci Brown: Because you got fired now or did you leave?
Tom Hardin: Oh yea. I left my firm. Sorry. I left my firm, skipping on a bit, I left my firm before my name became public, a few months before, because I kind of got wind of like, okay, it’s going to come soon. It happened a few months later. I had the work before my name was released. I basically left my firm saying, with the financial crisis, I did poorly in 2008, because I wasn’t doing well anyway, but there were other things going on in my life obviously.
Traci Brown: Yea, yea.
Tom Hardin: I don’t think it tipped my boss off, like something’s going on. Everybody left.
Traci Brown: You never told your boss?
Tom Hardin: Never talked about this. He was never charged. The firm had to pay back the profits they made on the four trades and never charged. I was a stay-at-home dad for six years. I think I was really depressed.
Traci Brown: Sure.
Tom Hardin: I never did talk to a psychiatrist. My wife did stay with me. Thank God she had a job so I could be at home when we had our second daughter. I was really getting overweight, like obese, like really heavy. I went to the doctor one day, and he’s like, man, your blood markers are off the charts. What’s going on in your life? I was thinking, you have an hour? I’ve got some stress going on. He was telling me to start exercising or it’s not going to be good for you. So my wife signed me up for a 5K. I know you’re a cyclist.
Traci Brown: Yea, yea.
Tom Hardin: I got into running, so 10Ks, half marathons, marathons, gone on to ultra marathons, qualified for the Boston Marathon. I was running so much, Traci. I was running like twice a day. I was trying, I think, to not deal with what I needed to deal with because this was my only outlet. I couldn’t get a job. Applying for a job. You can’t do that as a white-collar felon. It’s out there, everywhere.
Traci Brown: Oh no. Sports are great for that. Yea.
Tom Hardin: I got to exercise so much and got into ultra marathons, and 100-mile races. It was like that was all I could control was just getting myself in shape so I could be around for my kids. I had no idea, still, when I was to be sentenced – it finally happened in 2015 – if what would happen was me going to prison or not.
Traci Brown: Yea. What did happen?
Tom Hardin: I was sentenced in 2015 to what’s called time served. I had to self-surrender to the FBI in 2009 just for a few hours, so that was like less than a quarter of a day waiting to be processed, and that was my sentence, but I’m still a convicted felon. Can’t have any type of brokerage account, can’t ever work in a regulated industry again. I actually cannot even have a checking account in my name. If I wasn’t married, I’m not sure what would happen because insider trading is a financial crime, so it’s viewed the same as a Ponzi scheme or an embezzler. I’ll go to a retail bank, like a TD Bank, I’ll open an account. They don’t ask you the question with a checking account. Two weeks later I get a letter in the mail with no reason, just saying we are closing your account.
Traci Brown: Oh.
Tom Hardin: I finally figured it out. A banker called me from his cell phone one day. He was like, you’re on every money laundering list in the world, just so you know. I’m like, money laundering? But I know, obviously, it has to do with my case, but oh my God, it’s a life consequence for some of these indefinitely.
Traci Brown: Wow. So then, how’s your wife doing through this whole thing?
Tom Hardin: I mean, surprisingly, she held it together. I mean, she stayed with me, and 85% of marriages end when a spouse gets a felony. It’s not a surprise. Most spouses, especially in my industry, the hedge fund person, for that future lifestyle.
Traci Brown: For the cash, you bet. Yea.
Tom Hardin: The future lifestyle of a convicted felon. I wasn’t allowed to tell anybody except for her when the FBI approached me. I waited a few days. I’m having panic attacks, night sweats, so she knows something’s up. I usually keep it light, make her laugh, but I was really depressed. It was scary. I told her one Friday after work. A young couple in New York City, sort of, how was your week? She was actually working at Lehman Brothers, so up to this point she had some great stories about what was going on. I was like, wait a minute, let me go first. The FBI just approached me, so I need to tell you. You’ve got to sit down. She can see I’m serious. I told her. It’s sort of like, what? I thought you were going to say something else. You didn’t do anything to hurt me, but oh my God, this is going to impact us.
Traci Brown: Yea.
Tom Hardin: But the way she took it was like, I wasn’t trying to hurt her, like it was infidelity or something like that.
Traci Brown: Right. That’s different.
Tom Hardin: I think she was preparing for something like that. This is sort of like out of left field. FBI what? Can you say that again? It wasn’t easy, obviously, but we got through it. I think she just felt like, okay, you got us into this. I have faith you’re going to get us out of this. It is very rare though for the spouse to stay with the person.
Traci Brown: Yea. Wow. Okay, then what’s going on now for you? It’s been what? Six years?
Tom Hardin: Yea, six years since I was sentenced for this. Again, just because I’m sentenced doesn’t mean I can get a job. It’s still out there.
Traci Brown: Are you just speaking now, or what are you doing?
Tom Hardin: I was told you have to start your own company. I tried various companies. I tried drop shipping items from Alibaba and getting them onto Amazon. My listings were hijacked by my suppliers in China. Then in 2016, that summer, the FBI called me again. I thought, oh my God, what are these guys want now? My wife’s like, what? I don’t think I did anything? There’s no Napster anymore. What am I doing? They said, Tom – it’s the agent I knew – he’s like, we have our rookie agents in, only if you’re interested, Tom, we’d love to have somebody who we’ve worked with as a cooperator come and train them what it’s like when you tap somebody’s shoulder on the street. What is it like? I went and talked to the FBI, and they’re like, Tom, the $46,000 you paid was like the third lowest anybody in those 85 cases. I was the youngest guy they charged. They’re like, the whole thing, why did you do it? Why did she call you? Why did you . . . ? I told the agents, and they’re like, you should go make lemonade out of lemons. Like okay. There’s an opportunity to go speak about this. I’m so introverted and analytical, I had a fear of speaking and also who wants to speak about this? It’s interesting to have other topics to speak about obviously, but who wants to go out there and say mea culpa all the time and say here is the worst thing I even did? They said, actually, I think people can learn from this because we see it every decade. There is a new crime. There are young people. There is rationalization. So they told me some books to read about the psychology of the behavior. I put that with my story. I cold emailed 400 financial firms in New York City. Hey, I’m TipperX, can I come talk to your team? I got two responses, one thought it was a cybersecurity attack because he was like, wait, is this real? Okay, I can give you referral for like phishing training. Another guy that had me in didn’t pay me. He was like, oh, I’ll be happy to do a referral. Come talk to my team. I talked to them about what we just talked about now. He gave me a referral and that’s how the speaking started. It’s been sort of five years, over 300 something talks. Basically, I do it as part of annual compliance training, which we all know in the industry can be very dry, so I come in and tell the story. It’s also ethics training I have been doing. I’ve been doing ethics courses for associations, like CPAs, just pulling together elements in their careers where there is that line we can all cross. Why do we do it? It’s all about the moral temptation too often. With ethics, we talk about ethical dilemmas, which is like, here’s a right, here’s a right, and mine is like, here’s a right, here’s a wrong. Why do we choose the wrong? I think people think beforehand, I would never choose a wrong. If you read the Tom Hardin case, it would take you two seconds. Like, I wouldn’t do that. But then again, what are the incentives? What’s the environment? We all have the capacity to do something bad. That’s really what the talk is about, what I’ve been doing the last couple of years. I sort of fell into the speaking thing.
Traci Brown: So then, what’s your message for folks? Like the take home, even today, with your keynotes? When we speak, they all want takeaways, right.
Tom Hardin: Yea. Exactly. I go back to, at that moment she calls me, I traded. I made a decision in isolation so the perils of isolated decision making. Like I didn’t talk to my boss. I didn’t talk to anybody else at my firm, didn’t talk to anybody outside my firm about what I was seeing. Since I spoke at the FBI five years ago now, I have done this deeper dive with other white-collar fraud. White-collar crime in the U.S., there are thousands and thousands of people charged every year, just like me. It often goes back to a person makes a decision, doesn’t talk to anybody, crosses that line. That’s one thing. I often talk to younger people and really have a good audience with people just in the first few years in their career where all you may hear are success stories. Here, here is another where they can hear I’m very vulnerable about sharing everything. They can ask me anything. I always tell them, make sure you have a mentor. I had no mentors in my 20s. Had I known anybody outside my business, I think at that time, and said, you won’t believe what’s going on in this industry, this woman just called me . . . If you were my mentor, anybody would have slapped me around. Why would you ever do that? You’re 28. You’re in a fantastic organization with potential to never have to work again at this career if it goes well for you, why would you ever cross that line? So, I think it’s really important for young people to have mentors. I also think it’s important, we have such a big speak-up culture now in every industry about if we see something. We never talk about the listen-up side. I’ll often speak at a bank or a big accounting firm where it says “speak up” on the wall, but the young people are afraid to because they never hear back. It’s important for senior managers to listen up. Those are some of the takeaways. Most are to just have some self-awareness. When you’re young, the personality tests, what are your strengths, what are your weaknesses? I didn’t realize I just wanted to please people so much and be liked by people in my 20s at that time. Those are some of the takeaways. I always customize it for who is in the crowd and what’s going on.
Traci Brown: Sure. Sure. Oh wow. One last tip for your audience here. What have you skipped? Something really important that people may find some value in?
Tom Hardin: I guess one thing to end on is I’ve talked so many times and sometimes people come up to me and they’ll say they’re going through something crazy in their life that is self-inflicted, like maybe not committing a crime, maybe a relationship in their family, maybe professionally, and they’re so caught up on how they can’t get through it. I was that way for years. I was just running like a mad man doing these ultra marathons, not dealing it. I think these experiences of life, I often get coffee with somebody after a talk and just sort of go through talking about their life and these experiences can either define us for the rest of our lives, so again, this could just define me forever, and I would have all this shame and maybe even be suicidal or something at some point.
Traci Brown: Sure.
Tom Hardin: It can destroy us, it destroys marriages, relationships, or we can develop from it. That’s kind of how I frame it, define, destroy, or develop. We can develop from anything. I want to go to my grave, not with these four stock tickers on the grave, I want it to say, alright, he screwed up, but look what he did for the rest of his life. That’s one thing just to think about. It’s amazing, especially now with the pandemic and the focus on mental health and all that. You can develop from any situation, if is self-inflicted, if you choose to. That’s one takeaway.
Traci Brown: Wow. So, do you think, like two questions, and then we’ll be done. Do you think you’re a better person now, and what do you think your legacy is going to be?
Tom Hardin: I don’t know if I’m a better person now. I think I’m always . . I mean, there could be another situation, not hopefully a crime, but something I can always rationalize. I think I have a higher sense of self-awareness of like, okay, somebody could be talking to me. I had a friend, PPP fraud is a huge thing, PPP loans, I had a friend that owns a small business. He was thinking of going down the slippery slope, naming his contractors as employees. My antenna is so high for this stuff now, I said, hey, so and so, do you want to be like me? No! Your line of thinking right now is leaning you that way if you are going to apply for PPP and these people aren’t your employees.
Traci Brown: Right.
Tom Hardin: I have my antenna up, but I don’t think that makes me a better person. But I have a better antenna for it. What was the second question?
Traci Brown: Legacy.
Tom Hardin: Legacy. I just hope people can learn from the story. I mean I hope to be speaking for a long time and that people will look back, my children will learn from this. They’re now 11 and 9. They know what I do in their own terms. They were googling me, especially in the last 18 months. Hey, what do you speak about? We talked about it. It’s been a good teaching example for them about hey, this happens, this might happen, but also what I’m doing now because I didn’t want them to hear about it from another parent at their school. So and so’s dad is this guy. I hope to leave a legacy just like, look, you can rebound from self-inflicted situations like this. Some people say, oh, it’s inspiring. But inspiring is like you’re hit by a bus but then you do something. Self-inflicted career decimation, I sort of say that tongue in cheek, but that’s really what it is. Alright, you’ve done something, but what do you do about that going forward? I’m hoping to move forward that way in the future as a legacy.
Traci Brown: Well, you know what, I’m glad you’re out there spreading the message and doing what you’re doing. Thanks for coming on the show!
Tom Hardin: Thanks so much for having me on, Traci. It’s been a pleasure.
Traci Brown: Okay. Cool.