Can photo-sharing app be used for insider trading?

No one should be comfortable using Snapchat or any other communication method to share inside investing information, warns 1 US attorney.

By Julie K Balise Jul 17, 2013 4:45PM

An image is worth at least a few seconds to most Snapchat users.


Its value could go up a whole lot, though, if it contains investing advice. In this video, Preet Bharara, U.S. attorney for New York's southern district, speaks with CNBC's Jim Cramer at Wednesday's Delivering Alpha conference about the Snapchat app, which allows users to share photos and videos that disappear after a few seconds.


What happens if this technology is in the hands of an inside trader?

"Can the bad guy Snapchat 'Go buy Leap Wireless at 3:45 on Friday' and get away with it because you don't have the technology to stop it?" Cramer asked.


Bharara admitted that he was not familiar with the app, but said that technology "is a big deal."

File photo of Preet Bharara on Jan. 18, 2012 (© Peter Foley/Bloomberg via Getty Images)

"Insider trading is a crime of communication and other crimes are often facilitated by communication," said Bharara (pictured). "Law enforcement is always trying to take the lead and always trying to stay a step ahead of the bad guys."


Law enforcement needs to think about Snapchat, instant-messaging services, or any other communication method to stay a step ahead of criminals, Bharara said.


Snapchat users can send photos or videos that can only be viewed for up to 10 seconds. Users can type short messages or draw on the images. After those seconds are over, the image disappears -- unless the recipient takes a screenshot of it. In that case, the sender receives a message alerting them to the screenshot.


It's important to keep in mind that "human beings are human beings," Bharara said. While Cramer's daughter might not share his Snapchat history with investigators, or vice versa, the same cannot always be said for a potential partner in crime.


"Nobody should feel comfortable, no matter what method of communication they are using," he said.


There's also the issue of wiretapping. Bharara has defended using this method to detect insider trading and continues to do so.


More on moneyNOW

Jul 18, 2013 4:19PM
This is a bit overblown, it appears that the message has been deleted.  When a forensic examination is conducted on the mobile device, an examiner will be able to recover the message and any media attached.
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