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The Inside Story of Tipper X

On April 14, as part of the Dawdy Speaker Series at the University of Missouri, special guest Tom Hardin was invited to share his story with students at the university’s Trulaske College of Business. Jay Dawdy, president and CEO of Gryphon Strategies, sponsored the annual event that gives accounting students at his alma mater a chance to hear stories from the trenches of the accounting and investigations world.

At 28, Hardin was a junior partner at an up-and-coming hedge fund. He was on track to achieve his dream career, but before long, felt like he was falling behind in an increasingly competitive industry. Then, a moment arose when he made a decision to cross a very important line and the rest is history. Hardin was later charged with felony securities fraud and, known as “Tipper X,” became the FBI’s most productive cooperating witness in Operation Perfect Hedge, a sting setup by the federal government in 2007-2012 targeting the hedge fund industry. The sting branched out into the largest insider trading investigation in 25 years, leading to over 80 guilty pleas or convictions.

Hardin shared his journey down the slippery slope into criminal activity and the impact it had on friends and family. He was asked how that started and what, if anything, may have helped him avoid temptation. “Not making decisions in isolation,” he said. “That’s the point where it starts. I refer to it as isolated decision making. If you find yourself in that place, you need to get outside your head and talk to someone.”

Hardin said there was pressure and temptation. There was always a group that had a certain status at conferences he’d attend. To him, that group was the inside crowd. “I needed and I wanted to be liked by everybody and I wanted to fit into that group. So when I got the inside information, it’s like the test answers fall into your lap. What are you going to do? I made the wrong decision.”

Regarding his fateful decision, Dawdy asked, “Was it performance based in any way?” “Absolutely,” said Hardin. “My firm’s goals became very short-term after a rough start, and I was under pressure to make money every month. It’s also implied, if not, that my firm would find the next person to hire. The pressure to make that performance every month was just enough to rationalize it.”

Hardin discussed the psychological traps which pulled him into a spiral of rationalization. “You feel like you’re not hurting anybody. The victim is the company whose information is stolen, but it’s not really like a human. It’s definitely unfair and it’s always going to be a crime of rationalization.” He said he tries to create awareness about this now but, again, it’s a slippery slope. It’s often a junior account executive at a publicly traded company who learns their company’s going to be acquired. They call their  uncle, who’s in the market. It’s something that’s just in the moment and it becomes an easy case for the SEC to bring.

“Insider trading is the oldest economic crime there is,” said Hardin. “It goes back to 1792 when Alexander Hamilton’s Assistant Treasury Secretary, William Duer, was using leverage to speculate on the first debt issued by the country. When news broke, Duer was actually chased through the streets of lower Manhattan and almost disemboweled, so I got off pretty easy.”

It starts with the smallest, seemingly harmless decisions, but crossing the line between questionable and illegal is both deceptively easy and incredibly costly. “In all, I made four ‘tip and trades’ but not for $46 million, or $4.6 million, but for a total of $46,000. For that amount of money, I had thrown away my career at age 29.”

Gryphon would like to extend a special thanks to Vairam Arunachalam, Director of the School of Accountancy at the University of Missouri and Joseph A. Silvoso Distinguished Professor, for his diligent organization and support of this event.


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