As I have discussed here many times, the concept of betrayal underlies many insider trading cases. The drama level for the betrayal varies from case to case, of course, and is occasionally enhanced by the fact the case involves one family member betraying another family member. It is for these very special occasions that I have introduced the “Familial Betrayal Advisory System.”

A complete list of cases that I have slotted on the FBAS is below, and today we add one more: SEC v. Ni.

The SEC alleged yesterday that Zhenyu Ni of San Francisco made illegal profits of $157,066 by insider trading in the securities of a company called Bare Escentuals, Inc. At the time Ni's sister was Bare's Director of Tax, and Ni allegedly overheard her discussing due diligence for a possible acquisition of Bare. The SEC alleges that Ni

overheard his sister taking phone calls during which she used words such as “due diligence file,” “potential buyer” and “merger structure.” Ni then began purchasing Bare stock and call options, ultimately spending almost $165,000 over the next month acquiring securities in his and his father's brokerage accounts. When Bare announced the tender offer after market close on January 14, 2010, the company's stock price jumped more than 40%, and Ni allegedly netted illegal profits of $157,066.

After careful consideration, I declare this case to fall under Betrayal Level: Low (”Someday We'll Laugh About It”) on the FBAS. The rage level accompanying some of the husband-wife betrayals just isn't there in these sibling betrayal cases. I mean, after 20 years of having your hair pulled and being embarrassed by your brother in innumerable ways, an insider trading case is probably just another brick in the wall. See SEC v. Gangavarapu (brother's insider trading betrayal of sister ruled "Low" on FBAS).

To recap, the full list now looks like this:

Severe ("Hell Hath No Fury"): SEC v. DevlinHigh ("Restraining Order"): SEC v. StummerElevated ("Clothes Thrown Out the Window"): SEC v. EdelmanGuarded ("Counseling Required"): SEC v. Goodman; SEC v. Rocklage, SEC v. MacdonaldLow ("Someday We'll Laugh About It"): SEC v. Melton, SEC v. Gangavarapu, SEC v. Ni

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