Ep 3. The Wolf of Wall Street

(gentle music) - You kind of feel helpless. He was just profiting more and more. - It was within our grasp the evidence that we were looking for, but it never crystallized. - We get this random phone call on Lucas Camais' phone. It's Chris telling him that he's in Melbourne, but he's forgotten his other phone. I thought that's awesome. (laughs) (gentle music) - Hi, I'm Angus Grieg. A reporter with the Australian Financial Review in Sydney, and this is episode three of The Shaw Thing, a podcast sponsored by McGraw-Nickel. Previously. - I can't really forgive him 'cause I don't really have a strong sense that he did anything personally to me to need forgiveness. The betrayal of Christopher by Lucas, I think is one of the highest obscene. - I'm just wondering if you could put me through in a Christopher Hill. - We had a conversation probably three or four minutes and after I hung up on that, I think I was almost laughing. (dramatic music) - Last episode, we heard all about the criminal partnership between university friends Chris Hill and Lucas Camais, about how their modest, insider trading scam got hijacked by greed and betrayal. About the banking world and its culture, playing on Lucas's narcissistic tendencies, and how Chris absolved him of all blame. And finally, we followed the manager at Foreign Exchange Broker Pepperstone as he played Cyber Sluth, making the initial link between a public servant, compiling vital yet mundane national statistics, and a fast-moving banker in what would become Australia's biggest insider trading heist. - We're reading one of the court transcripts that the broker from Pepperstone Joel Murphy, that he actually rang you at the ABS. Do you remember that? - No, that's the first I heard of that. It's a bit sneaky. No, no recollection of that. Not 100% certain that that happened, but the ABS did. - After four months of monitoring Lucas's trading and discovering via Facebook, that he had a friend working at the ABS in Canberra, Joel did indeed ring Chris. Chris took the call at ABS headquarters in Belconon, and out of suburb of Canberra, as far from the parliamentary triangle in Embassy Rose, you can be, while still remaining in the ACT. Their conversation provided the final piece of evidence Joel required to pick up the phone and call Asick. - I was on the licence at the time as a responsible manager, so I felt there was my obligation to make sure that everything was given to Asick and it was bought to an end. But as is often the case, after agonising over the decision, Joel called the wrong number at Asick. - Welcome to the Australian Securities and Investment Commission. - It didn't go through to the right part, obviously, because we didn't know anyone, and I think it's enforcement, is the area. - Hi, you've reached Asick. - Whoever Joel rang, knew enough to realise this was big. - Can you hold please? - She was, you know. Almost speechless. Quickly say, look, just stay on the phone, let me contact another department. - Okay, they're gonna call you back in a couple of minutes. - Very quickly we had Asick enforcement speaking to us. - Like Joel, the corporate regulator had never before seen an insider trading case in the foreign exchange markets. In a few short hours, the matter made its way up the line to veteran investigator Ray Washel, whose boss Andrew Poppies head over the cubicle on the 20th of February, 2014. - Typically, I think the misconduct and bridge reporting team or assessment and intelligence that it's called now, you never have like a 30 day KPI to work up an initial complaint before they present it to a triage committee for acceptance within enforcement. So the fact that it happened, you know, basically on the day, just indicated how interesting and potentially important, you know, this matter was. The word back from above was that we should probably have a chat to AFP as soon as possible to arrange a discussion as to how we might approach this matter, working together. - There was not only the insider trading matter for Asick to investigate, but at the same time, a 109 year old federal institution, the ABS, had most likely been corrupted for the very first time in its history. That was the AFP's turf. - It involved the potential corruption inside, you know, by a Commonwealth employee, it was a pretty serious allegation. That's Dean Wilens, the federal agent who at the time was new to the fraud squad. After spending much of his career in homicide and organized crime, this one was super quick, it was the day. It was referred in by Asick. I'm pretty sure it was the 20th, and on the 20th we accepted it. So within 24 hours of Joel Murphy calling in his suspicions, it was picked up by both Asick and the AFP. For two large bureaucracies not known for their haste, this was record breaking. Part of the urgency was that Lucas's trading had risen to a whole new level, and the AFP were alerted. Just a day after Joel made his call, the corporate regulator got a similar tip from another foreign exchange broker, Axi Corp, where Lucas had set up a second secret account. In just three days, Lucas had already made $600,000, once again correctly betting on the direction of the Aussie dollar just before an ABS release. And once again, he hadn't told Chris. Putting the two together, it became apparent that this was potentially quite a big matter. That men Asick and the AFP waved the usual protocols to begin working together. For the first time ever, on an insider trading case. Shortly after the investigation got underway, Ray Wash will discover the AFP were going all in on this one. Before we go any further, remember an episode one we use trading floor bells, 57 seconds apart, to illustrate just how long it took Lucas to make $13,500. (bell dings) Let's do it again. So stick around. In 25 minutes, we'll let you know how much Lucas will profit this time. For now though, let's go back to Ray. One of my colleagues, Catherine and I, went down to the AFP headquarters to discuss those issues with them. And we were sort of under the impression that we might be speaking to five or six AFP officers. So Dean Willens took us down to, through the corridors of the AFP and then opened up these double doors. And there was like a massive like boardroom. It was bigger than a boardroom actually. It was like something you'd seen a conference center. And there were probably 25 or 30 AFP operatives in that room ready to hear from ASIC about, about what insider trading was and what these FX derivatives were all about. So we were kind of unprepared for that audience. Such cooperation was so unusual. The AFP would eventually need ministerial approval to lay charges. But before that could even be contemplated, authorities would start following the money. Within days, federal agent Carly Standing could see Lucas had far more cash sloshing through his accounts than could be justified from his wages at NAB. He was having withdrawals and deposits for values up to and including our $795,000 in a single transaction. So this clearly stood out to me. Because they'll obviously quite larger than his regular deposits, which were his NAB salary going into his accounts. So it's at that stage that I start questioning, well, where are these funds coming from and what is he doing with them? And where did your enquiries then lead you? Okay, so after I then had his bank statements, I started conducting a financial analysis. So the purpose of that was to try and identify the source of those large deposits going into his bank account and then tracing the movement of those funds. And during that time, identified he had a lot of inter-account transactions between his various bank accounts. But essentially, the origin of those funds were coming from his two trading accounts, which he had with AxiCorp and Hepistone. But a money trail isn't proof of insider trading. And from the very beginning, there were worries within the AFP and ASIC that further proof would be difficult to obtain. Here's Ray Waschall from ASIC. In the early stages, we could see that there was trading and there were profits being made. And we had some suspicions about what was going on, but it was extremely difficult to actually prove it or to have enough evident or intelligence to be able to pursue it further. Those burner phones were doing their job, frustrating the already high burdened proof required for insider trading cases. I want to bring back into the podcast, my own partner in White Collar Crime, Professor Clinton-Free from Sydney University, who's been helping me dissect this sure thing. So Clinton, why is insider trading so difficult to prove? Insider trading is a very difficult thing to prove absent a confession or a guilty plea. So it pivots on proving to a judge or jury that a person knowingly acted with material non-public information. And if the person denies that and they've got any sophistication about hiding what they're doing or making it more difficult to tell, I think the evidentiary thresholds are really high and difficult. At the same time, Asick was under pressure as an organisation. The director of public prosecutions has revealed the reason he chose not to pursue criminal charges. Memories were still fresh that had failed to pursue a criminal case for insider trading against comedian turn company director Steve Weissard in 2005. Was because the crucial witness Weissard's accountant Greg Lai refused to give evidence. In more recent years, there was the case of John Hartman and a perception Asick had dragged its feet, prosecuting his co-offender Oliver Curtis. He used the $1.43 million they made on a lifestyle of extravagance. The gasecs are a favoured whipping boy of every word. I think it's very, very common that people are critical of Asick and it's a hard remit that they're setting out to do. They've been criticised in lots of forums around their performance on insider trading over a long period of time, both domestically and internationally. Absolutely, I felt the pressure. Ray Waschel says there was plenty of interest from above. Everyone from my boss to their boss to their boss's boss was very, very interested in the outcome of this investigation. That pressure would continue to build as February dragged in a March, then April. The hard evidence Asick and the AFP required to start knocking on doors remained elusive. And as the investigation dragged on, the levels of frustration rose. He is Kylie Standing from the AFP. You kind of feel helpless. You could see what was happening. You could see he was just profiting more and more. But essentially, we had our hands tied and we weren't, we couldn't take action at that stage. You need that evidence and it was just a waiting game. So yes, definitely throughout the investigation there were points of frustration. Everyone was trying to think how else could they be doing this? How could we capture the evidence that we need? And there were times when Kylie even thought Lucas was taunting them as he moved money between accounts. I remember specifically there was one transaction where Lucas Kamei had put the description as War Street. Jordan Belford, sounding like a kind of twisted Robin Hood who takes from the rich and gives to himself and is merry little band of brokers. For those who don't remember the film starring Leonardo Caprio, it's basically a three hour tutorial on innovative ways to steal money, which can then be blown on drugs, booze, and outrageous luxury. In a way, maybe does it show a bit of his arrogance or his once again, his overconfidence to just slip that one in his bank statements? Whatever Lucas is thinking, it would spur the AFP in immobilising resources usually reserved for organised crime investigations. As they sought irrefutable evidence that insider information was passing from Chris to Lucas. Federal agents, schooled in the dark art of surveillance, would install a listening device in his car and bug his phone. With the bank's approval, they would even quietly enter Nab's Melbourne headquarters one evening and place cameras in and around Lucas's desk. He became a watched man with up to 80 AFP officers working the case at its peak. It was Lucas who was the one doing the trades. He was the one that was the most visible to us. If he was receiving information from an insider, he was going to lead us to it because he's got to get it from the insider somehow. So he was the main focus. As head of Operation Leith, as it was named, the responsibility for obtaining proof ultimately fell to Dean Willens and he was getting less confident by the day. The frustrating part was that nagging bit in the back of your head that it's not insider trading. He could actually just be legitimately doing this, but he's just a really smart kid. We had people making bets in the office. If you get these guys, I'm going to run around the office and make sort of stuff like you know, it was just, you know, there was a definite feeling. There's a definite hard investigation. It was just almost impossible. We had no evidence of how they were communicating or passing on that I sensed the information. Despite this, the theory remained that Chris was passing the ABS information to Lucas. We were looking to see if there were any funds transfers going to Christopher Hill, whether any large or suspicious cash withdrawals, then being used to be passed on to Christopher Hill. But all our inquiries and analysis, it was just coming back Neil and we just couldn't get that connection. The interesting thing for us that we didn't understand then was why we weren't seeing any of the funds being transferred to Christopher Hill. We had concerns of because this investigation was then taking a little bit longer. We just had to sit back and essentially watch what was happening. So at this stage it raised quite serious concerns about the possibility of those funds going offshore. Once those funds go offshore, it makes it incredibly difficult for us to then recover. But then text messages intercepted in March 2014 between Lucas and a family friend indicated his plans were closer to home. This is a reenactment of what police captured. Do you watch the block? And sometimes why? Because I want to buy one. You're not serious. Stop saying silly things. Which one? The girls. I suppose there's these good. You'd need to find out what happened after the sale of the other blocks. Under 2.3 mil, it's good value. The girls is a reference to Adelaide Twins, La Sandra and Alyssa Fraser, both former police officers who are appearing for a second time on the block. He is La Sandra. So I remember Lucas. I think he sticks out in my mind because I wouldn't be able to tell you who else came through that property. Other than him, he stuck in my mind particularly I think because he was quite young and he was showing interest in purchasing our property, which was valued around the $2 million mark. So I just kind of think he had somebody this age afford to buy a property like this. La Sandra says Lucas inspected the apartment on three occasions. He asked about putting a spar on the roof and complained about the microwave being dirty. But the fixtures and fittings were not his main concern. I remember once he said to us, "Okay, let's make a deal." If I purchase this property and I win, "I win." We need to shake on it now that you and your sister will come to a night here when I throw a party for all of my friends and you guys have to be my VIP guests. VIP guests. Can we shake on it? It was a little bit weird, but I guess because we thought that you know, potential. He was young, I guess he thought, kind of maybe be cool in front of my friends to ring the blockcales to my party. Not that Lucas would be appearing on TV. Well good evening ladies and gentlemen, welcome to the auction sale today of apartment number three. Well I do remember specifically with Lucas, probably on the third time we met him, he did say to us, "I'm not going to be bidding. I don't want to be on TV." And I do remember thinking at the time, "Oh that's a little bit odd." Like that did surprise me because he came across as one of these types of guys that would almost thrive in that type of environment of being like this young kind of guy on TV. I get to show my face to 1.5 million people in Australia to show how successful I am. Behaviour psychologist Juliette Tobias Webb sees the block purchase as Lucas looking for acclimation, even as his behaviour spirals out of control. And maybe it is that greater visibility, so being able to actually talk about it on the training floors or with his friends. So you don't just have the success of buying a house, you have the visibility to your friends and family but to the world in some ways or to Australia at least. So it's a step up in in terms of really being motivated by extrinsic rewards, but it was a huge risk that is interesting in itself because I think that's where you would almost put a target on your head so to speak. So that's what tells me in some ways that he was in that almost hot irrational feeling invincible state. No further betting at 2.375 million it is going, it is going, it is sold, thank you very much. In the end Lucas would pay $75,000 above what he estimated to be good value. And just after buying the apartment he was quick to remind the twins of their agreement. The first thing he Lucas said to us was yeah he locked us in on that deal that we made about coming to his party. I think it was a little bit uncomfortable that Lucas wanted a later night to come along to the party like as if it was like he was getting excited that we were going to be there especially in front of his girlfriend. For Lucas overpaying on what he thought was good value hardly mattered as he covered the apartment purchase with a single trade. Just three days after swapping those text messages about potentially buying the block apartment. Lucas would place his largest trade. In the run up to buying the highly visible block apartment Lucas would place his largest trade and in doing so pay for the property with a few taps on the screen of his iPhone. On March 13 at 11.10am AFP surveillance cameras would capture Lucas taking his phone off the hook leaving his workstation on the nab trading floor and heading into the men's toilets. Over the next 25 minutes he would buy and sell foreign exchange contracts giving him $450 million of exposure to the Australian dollar. Here's our market editor Vestna Poliak to explain how Lucas was using leverage and taking almost half a billion dollars of risk. So Vestna do you want to just break it down for us what does all this mean? Okay so what's happening here is Lucas is bought $4,500 Australian dollar contracts. Each contract has a face value of $100,000 so it's $4,500 times $100,000. That gives him $450 million of exposure at face value okay. Now he doesn't have $450 million he needs leverage so the broker provides him 400 times leverage. He still needs skin in the game so he's got 1.13 million to put down of his own money and that's massive okay and his bet is that the Australian dollar goes up against the US dollar when the ABS data comes out. Unsurprisingly it did jumps over half a cent the job's number is better than expected it does exactly what it's supposed to so Lucas who's put down just over $1 million dollars has made about 1.4 million he's doubled his money in this one trade not many people would do that right unless they were certain of the outcome. So would you say maybe it's a sure thing? It wasn't sure thing. He can't obviously do that at his desk because it's too obvious so he needed somewhere quiet and somewhere secluded and private which you know obviously a toilet cubicle hopefully is. Dean Willins watched the block apartment go under the hammer from his couch at home knowing full well it was Lucas as he's surveillance teams had intercepted those text messages like the frustration in terms of not being able to capture that critical evidence probably really peaked around the time when you know sitting at home watching him purchase the block that was kind of fairly you know where it's so close but so far away and you know we're sure that he's using this money that he's obtaining from the insider trading to purchase this block. At 2.375 I know you're on the phone at the back I'll give you that. That trade in mid-march would push Lucas's profits above $6 million dollars 30 times greater than what he'd agreed with Chris. The magnitude of these profits and how quickly they were growing brought pressure on Asick and the AFP to start kicking indoors even though hard evidence of insider trading remained elusive. It was within our grasp the evidence that we were looking for but it never crystallised you know and that was sort of the frustrating thing about it. As time went on we were like almost certain exactly what was happening but we couldn't actually make that definite link we couldn't see the actual evidence to show that Chris was giving Lucas the information that he was trading on. To make matters worse for investigators on April 2nd and 3rd Lucas would make two trades based on ABS data for a total loss of $117,000. Police would later deem this an intentional loss to give the appearance of a more typical trading record. But at the time it only served to cast further doubt on a case which was slipping away from authorities. We were waiting and waiting and waiting for this to happen for us to get that evidence but it just didn't happen. Just as the pressure to kick in a door was becoming harder to resist the team caught a break in late April three months after their investigation had begun. We get this random phone call on Lucas Carmose phone and it's Chris telling him that he's in Melbourne but he's forgotten his other phone and that's why he's calling him on this one and come and pick me up at this address tomorrow or meet up. So everyone was extremely relieved I would say because it kind of reached a point where we're going well how they actually doing this. Let's remember even though they had Chris as a suspect nothing was happening at his end. His story wasn't progressing beyond that initial phone call with Joel. All investigators could see was Lucas's ever more risky behaviour until now. Absolutely that was the first confirmed contact that we'd had. There was still a long way to go though because you know you talk about this turning points where we'll you know at that point where to clearly say everyone else can be excluded we are now solely focused on that you know corrupt government employee that is providing information to Lucas Carmose so it allowed us to hone all our resources where they were and they were spread you know across all these other inquiries. So at that stage I knew that the criminal team were going to put surveillance on and try and capture if there was any type of meetup. So we put physical surveillance on Lucas and followed him around and we used some more technical surveillance around Christopher Hill so that we could maintain and collect evidence around what he was doing. It was the Anzac Day long weekend and a pivotal moment for investigators but for Chris the day hardly registers. You can after remind me what which weekend was this Anzac Day weekend you go to Melbourne, Lucas picks you up and you go to the Box Hill shopping centre. Yeah so I think he yeah he must have picked me up and went to the shops. You know I think I was staying with the motor mine in Box Hill all the time. Dean Willens had no trouble remembering the details. Lucas drives around to Chris's mates place in Box Hill, picks him up, they had an absolutely incriminating conversation in the car which we had surveillance devices already installed in and they start talking about you know insider trading they start talking about you know some of their agreements. We asked the AFP in Supreme Court of Victoria to release the intercepts between Chris and Lucas but as they were never played in court our request was denied. Instead we have used actors to avoid the official transcript compiled by police. Lucas does most of the talking. No one knows I'm fucking doing this. I haven't told anyone it worked no I'm not even my girlfriend knows about it. Not even my brother knows about it. Have you kept it like that as well? Have you spent the money and your friends are like oh what the fuck's all this money? No I kept it in my room I put cash in my wallet when I go out that's it. Yeah as long as you don't put it in your bank account because then we get fucked. That old yeah. Yeah. Money just came up for fucking eight day bender at the goalco stuff. Drop probably two grand. Fucking friend. Yeah. You know what I do I do like this I'll just give you dribs and drabs five grand five grand ten grand you know and I'll just load you all the way up and be mindful I have the money in my bank account I can earn interest on it so I'm gonna give you more than 50% all right down to stand so if we make let's say 200 grand I'm happy to give you 60 grand you'll pay just under 50% tax anyway right Lucas is saying he'll give Chris just over 50% of the $200,000 they agreed on after tax there's no mention however of splitting the almost eight million dollars he's made so far on the side Lucas obviously has a quantity of money there for Chris as well and Lucas actually gives the money to him there in the car. Chris recalls Lucas giving him the money. I remember counting the money but I'd had it I had quite a big night the night before and I just gave up and threw it under the map in the car seat because of the furniture I wasn't feeling the best so that's that's sort of what I remember from that whilst it may have been you know a turning point in the in the case it certainly to me wasn't a standout kind of day the purpose of the pair meeting up was to buy new burner phones I think maybe when we were just sort of thought oh we we better get new phones that's what people do right change their phones Dean Willins picks up the story as Lucas and Chris walk into Box Hill shopping centre a low rise suburban mall which on that Sunday would have been filled with families dining and buying their weekly groceries. So we've got physical surveillance on them as they're going into the shopping centre they'd pretty much go straight to an optus store Chris is standing outside Lucas is in there buying these two prepaid sim cards and phones they both walk out of the shopping centre straight back into the car and again we're hearing exactly what they're talking about and this was the cracker of the conversation where I actually didn't believe the person that was telling me you know they basically lay out the whole scheme Lucas shows Chris his phone where he's doing these trades but he's only showing Chris one of the accounts. I've been very conservative with what a fucking been betting like you know how I've been doing it and with taking money and shit out like that just very careful have you bought anything with the money? No not really just fucking hearing there when you get a place you should just fern shit out with cash that's what you should be doing when you buy an investment property you'll buy your own house just fucking cash at all people don't count but it's not like it's drug made that's a good thing it's genuine with drunk cash it is going it is going it is sold thank you very much it was a vintage performance from Lucas who'd been anything but conservative with his trading and only days earlier had paid 2.3 75 million dollars for a house on national television and there it is from when you heard the bell previously to now Lucas has made sufficient money to cover the purchase price of the twins apartment with plenty left over for stamp duty that's 2.54 million dollars in just 25 minutes of trading with a single piece of information supplied by Chris Lucas's trading and performance in the car with Chris was deception on a whole new level they even talk about this is the last time we'll ever speak about this again we'll do this for another three months and that'll be it the whole thing was was laid it was unbelievable yeah that was that was probably a pivotal point and probably ironic because I think we were you know changing the phones because we thought that's what you're doing by changing the phones they got onto us I suppose and then in a moment of incomprehensible good fortune for police Chris and Lucas would reveal when they next planned to trade they'd even spoke about the next time that they were going to call the next trades that they that Chris was going to provide information on so we knew when they were actually going to make the phone calls and we knew then that when he made those phone calls he was going to relay that information that was so critical to our prosecution and we're going to capture it it was it was basically game changer they then went on to activate the burn a phones so the the falsies subscribe phones they're in the car so not only did we get the audio from them doing it we got the phone numbers there was a big sense of excitement and then everyone just had to get ready to go to that day of resolution so Ray do you remember that tape it was on a weekend I was with my wife who was visiting my mother and Lauren hospital and I got a call from Dean saying mate I think we got him I could not believe how detailed the conversation the two of them had it was like they were reading from a script of how to prove all the elements of the offending this is a jackpot but before any arrests could happen they would need to wait for one final phone call next on the sure thing spoke to my dad that first night I had a phone call from from the cell and I spoke to dad then and I think I think I basically just said I you just need to organize sorry you're on my take your time the sure thing is brought to you by the Australian financial review and sponsored by McGraw Nickel Australia's leading forensic investigations and cyber firm it was presented and written by myself anger skrig produced and edited by lap fan script editing by Colin Delaney technical production by David McMillan call Mac Lally and Tim Mummry graphics by Michaela Pollock and with thanks to nine news librarians Georgina Jannings and Marianne Zachnik and our actors for this episode were Andy Ryan Ty Harrah Eloise Fowler and Lisa Murray additional thanks to Sydney University Business School and Professor Clinton Free the sure thing was overseen by AFR digital editor Fiona Bafini and head of audio Tom McKendrick if you want to know more head over to afr.com/the sure thing there you'll find links to every episode as well as stories photos and background information on Australia's largest insider trading case you'll also find subscriber links for apple spotify and google podcasts wherever you're listening please rate and review us as this helps others find us at the financial review we investigate the big stories about markets business and power if you like the sure thing and want more of this kind of journalism subscribe at afr.com/subscribe