Fuld transskription af Tom Hardin: From Hedge Fund Analyst to FBI Informant | Ep 17

speaking that you do and the educating that there is some confusion Tom Hardin: there's a lot of nuance to this. So today when I share this story, I always make the point, hopefully nobody in the room at these hedge funds has the end to do what I did, But you could be nefarious like I was, eventually willingly doing it, doing it a few times. There's cash payoffs, crazy behavior, but you could also be negligent where you're not trying to do what, Tom was doing back in the day, but you could also be in a situation where you receive information. Any good analyst, when you're digging, you're gonna get information where it's not exactly clear on the providence, sometimes of where it came from. And so if you're trying to figure out materiality, which is usually a big question, I always tell the analyst, you don't want to be doing that yourself because you could actually step into my Michael Collins: Mm-hmm. Tom Hardin: situation where you're not doing what I was doing, but you're trying to tell yourself, You might have a big position in the portfolio. this isn't that material. Then all of a sudden there's an investigation and expose your firm and yourself to liability. So you always want to have those conversations with compliance. The challenge is sometimes compliance is not as visible to the business or look kind of in the way of success. And so you want to have that partnership with compliance. Michael Collins: can you talk a little bit about the competitive dynamics and the pressure on investors to get results? what are those dynamics at play? Tom Hardin: Yeah. So in my own situation, we were investing over a three year horizon. we were seated by Tiger Management, which was one of the most legendary hedge funds on Wall Street ever. And so by the time we were seated, Julian Robertson was in his mid seventies and sort of retired from actively managing money and was seeding the next generation. So at twenty-eight years old, I had this great seat. and then we lost money in the first quarter. And then my boss, the portfolio manager, changed our goals to now we have to start looking for shorter term opportunities to make money every month. So I think even today, something to look at is does when the strategy changes, do the controls change? does it change behavior, which it certainly did with me. And in my situation, we actually lax the controls where then I could start buying stocks in our portfolio and not have to talk to my boss as long as it was less than one percent of our asset. So that's something that changed at the same time. The goals changed and the control change. So even today, I think it's very important to look at when looking at managers, for maybe a new product, a new strategy. Again, hopefully nobody is trying to actively break the law, but like what happens, when the goals change, do controls change because I've learned that even with everything going on today with AI, human behavior doesn't change. there's always pressure. There's always numbers you have to hit. So just being aware of that. Michael Collins: is it in sort of bear markets or bull markets that there tends to be more risk of unethical behavior, the pressure that folks are under? Or is it greed on the upswing or is it sort of scarcity and needing to find new edge in a tougher environment? Tom Hardin: it's probably in a tougher environment where it could be harder to generate alpha. especially, sort of the end of the previous decade when interest rates were so low and the market was just consistently and even to this day, consistently clipping off very good returns when it's hard to get that alpha to hedge fund, that can be the pressure to get that edge to cross that line to get that one extra piece of data. and especially today For single managers, it's become more difficult because the multi managers are putting up great returns and have the best risk models the smartest people there. And so it might be harder, I think, the next decade, for single managers to continue to survive and compete with those multi managers. that's where the pressure can increase to survive So I say it's still a risk there in terms of chasing performance. Michael Collins: could you please take us to the moment that the FBI had approached you? I think reading the book, my heart was pounding and thinking about what that encounter would be like. Can you just sort of walk us through that so we can experience that with you? Tom Hardin: so there was four trades that occurred at my fund over a seven month period in two thousand seven. So it was not until July eighth, two thousand and eight. so more than eight or nine months after the fourth trade, I'm leaving my apartment in Manhattan to drop off some dry cleaning. And I hear somebody behind me say, Are you Thomas Covey Hardin? And the last time I heard my full name was my mother back in Georgia when I was in trouble. it wasn't my mom. I turned around two FBI agents, male and female, Straight out of Central Casting, come sit down with us. We went and sat down at a fast food restaurant in Manhattan and he said, Look, man, we know about your four trades last year. We know that you were just down in Georgia visiting your baby nephew, Carter, for his baptism last weekend and I was. And my first thought with the FBI in my face was, my God, my parents are gonna kill me. my gosh, my wife Sue's gonna leave me. We just got married. She had no idea about these trades. Then I thought, my gosh, this might impact my career. my God, I might be going to prison. I started making implicating statements. The FBI is writing everything down. I had no idea what they knew. I wasn't gonna start lying to them or creating cover stories, told them everything. And they said, Tom, you can help us out. And basically I took their card and said, Should I talk to a lawyer? And they said, No, don't do that. we can let you know when it's time to do that. So they're gonna play by their own set of ethics. and they said the

only person I was allowed to tell was my wife about this approach, nobody else. And then they called me a taxi and I went to work that day. So that was that morning, up to that point, the worst morning of my life. Michael Collins: My God, do you remember what physically you were feeling? Was there any doubt that they were legitimate, Tom Hardin: Yeah, I wrote, I think my heart was racing, my palms were sweaty 17 times in the book. My editor told me, but this is the way it was, and especially with that moment. you sort of hear what they're saying, it's surreal. I'm not hearing everything. It's sort of like a good cop, bad cop routine where the male agent is sort of like we where you were last week and we know this about your life. And then I'm hearing bits of it. And sweating at this Wendy's. It's just the worst place to be stopped. And he's saying these things, I'm not hearing it. My heart's beating through my chest. And then the female agent actually brought me down at some point. she put her hand on my hand, and her hand was so cold, it was so warm that day. And I looked at her and she said, Tom, the FBI's here for you. when you're ready to turn your own life around. So they're very persuasive in their psychological tactics and basically I said, Hey, I'm ready, took their card, but still had to go to work that day and still had to play up a normal presence at work when that morning was definitely out of the ordinary. Michael Collins: My goodness. How long did it take for that to sink in? Tom Hardin: Yeah, on the one hand it's sinking immediately, but on the other hand it felt pretty surreal. I remember hearing going to the office, my boss is like, Why are you late? And I just said, my wife was sick or something and had to deal with that. Sorry, I'm late. And then I went to the restroom, did the classic like water on my face, just trying to process that what happened that morning. Okay, I'm not under arrest. That was a weird situation where I'm not sure what to do. Should I talk to a lawyer? They said Don't talk to a lawyer. So I'm not doing that. And then all of a sudden it's around lunchtime. I'm walking around midtown. I just happened to be passing by St. Andrews and I saw that the time actually was their confession. I decided I gotta talk to somebody. If I can't talk to a lawyer, I need to talk to a priest. I remember on a Tuesday afternoon, there was a long line and having gallows humor, like how many other hedge fund people are in line Michael Collins: my goodness. Tom Hardin: talk to the priest. It's like basically your penance is to help the FBI. Now I should have talked to a lawyer very early, but didn't talk to a lawyer and talk to the priest. And then eventually I had to tell my wife. So after Tuesday, Wednesday, Thursday, I'm having panic attacks, bed sweats, going to the work before she wakes up, getting home after she goes to bed, just trying to avoid any face to face conversation with her. And then Friday after work, I figured, okay, now I have to tell her. I kind of felt like not telling her would be lying to her in a way and getting through the weekend. So Friday I said I have to tell you something, told her everything. And she basically said, you didn't do anything to hurt me. That's the way she took it. And if the FBI has given you a chance to clean things up, you should do it. And there's a stat I researched for the book, like eighty five percent of wives would have kicked their husbands out right there because, you know, it's that's how things usually end. Michael Collins: That's wild. you mentioned the lawyer point. I would love to hear more about sort of the controversy or ethical concerns around the government's use of sting operations and informants. Tom Hardin: Yeah, I think there are legitimate concerns and you have to be able to hold kind of I think two ideas at the same time. I think the first is that informants are inherently compromised witnesses, right? Most people don't wake up one morning and voluntarily call the FBI saying, I'd like to wear a wire. That's not how it happens. So they're generally cooperating because they've gotten themselves into trouble. Unlike whistleblowers who raise their hand, do the right thing. cooperators, informants may be hoping for leniency. they're often frightened. They may desperately want to demonstrate that they're useful. And all of those incentives matter, but at the same time, feeling enormous pressure from law enforcement is different from saying somebody was legally entrapped. And so in my situation, I would say the FBI, they didn't obviously create my original misconduct. I had already committed the insider trading before they approached me. So I don't describe myself as having entrapped but where I think the ethical question becomes especially interesting is what happens after someone, becomes a cooperator when they say don't talk to a lawyer or and you as a cooperator, you want to be useful. investigators want evidence. your cooperation will eventually be evaluated. So that creates a risk that the cooperator pushes too hard or leads somebody or interprets ambiguity in the most incriminating way or hears what they want to hear. So I wrote about, experiencing that tension myself. And I think the safeguard has to be cooperation, supervision, and transparency about the informants incentives. Really, one advantage of the kind of cooperation I did is that so much of it was recorded. And people aren't simply relying on me saying, Here's what this person said. In many cases, you can listen to what they actually said. So I definitely wouldn't romanticize informants and I wouldn't demonize the practice either. I think cooperation is messy because human incentives are messy. Michael Collins: Yeah, When you were writing the book, you mentioned replacing the name of folks as needed. What was maybe the hardest thing to put on paper or or what were the topics that you wrestled with including in the book? Tom Hardin: Yeah, the

insider trading mechanics weren't the hardest part. it was interesting because usually people write their book and start their speaking journey and I'd been doing it for eight or nine years and then wrote the book. So I was used to telling the story. And so the much harder material was the collateral damage. we actually cut several more wire wearing stories because it kinda got repetitive and in the first draft it kind of glaced over the personal impact, the damage. And so to my wife as I write about my parents, my children, just the shame, the financial consequences I write about, friendships that changed, trying to rebuild a professional identity, those were more difficult scenes to put on paper. And I also wrestled constantly with the difference between sort of explanation and excuse where I write about this and talk about Pressure matters, culture matters, incentives matter. What other people are doing around you matters. And I spend much of my sort of professional life talking about those factors now. But at the end of every decision about my own conduct, it has to be the same sentence. I chose to cheat. I made the decision. It was nobody else's fault. And if you read, there's a few other memoirs of people on these cases. There's one of the most well known guys who said he didn't do it, it was somebody else's fault. And that's not the direction I'm taking. You have to own it. You have to be held accountable. And never wanted the book to silently transfer responsibility away from me. Michael Collins: Yes, I can totally imagine that must be the tension always when you're speaking of folks making personal judgments about whether somebody is truly understanding the burden of what they did. What are some of the interesting, unexpected industries or applications for your speaking and training? coming from the tech startups, I feel it's my opinion that there's a ton of fraudulent and unethical behavior in tech startups because of the pressure of raising venture capital, proving early traction, and creating something from nothing. So I feel like in my experience, I saw all kinds of of fibbing or lying about key metrics that the companies had. And there was always a lot of pressure on everyone involved to sort of drink the Kool-Aid. Tom Hardin: Yeah, it's interesting because I started off just speaking at the FBI ten years ago and the FBI said you could go scare all these tech funds analyst with your story. And so I still do quite a bit of that, but really it's expanded well beyond that in the last couple of years. really any kind of regulated industry, I feel like I've definitely talked to pre-IPO tech companies where they're about to go and become public companies and, the implications of actually being tippers. So not even doing the trading, but tipping their friends and outside the firms and like what that looks like or how you could inherently be doing it and not understanding that you're doing it. You're just talking about work or what you're working on. So that's more industries that are bringing me in. care has become a big one. Medical devices where There's massive risk of bribery. So violating FCA, where, nobody who ever pays a bribe calls it a bribe. They call it paying a toll or paying a tender to get business done in this country. And over the years, I think what's surprised most maybe is that people stop identifying with the insider trading like fact pattern and start identifying with the psychology. someone will come up afterward and say, I've never done anything remotely like what we did, Tom, but I recognize that little rationalization, or I recognize telling myself it's only this one time, or I recognize keeping something from my spouse, or I recognize just becoming somebody slightly different at work. And increasingly, people sort of ask about my wife, especially through the book, like, how did she stay with you? How'd she survive it? How you rebuilt something like that. So it started off, and still a lot of what I do today is the hedge fund compliance journey, but really it's gone way beyond that Michael Collins: That's incredible. I remember in the book, your wife had the opportunity to speak as well as a result of your journey. And that had a powerful effect on people to hear it from her perspective. what are the other common reactions or questions that you get from the audience or from readers that reach out to you? what has surprised you? Tom Hardin: Yeah, there's one question again, actually, that came about 2017. So my first year really sharing the story. and again, I was back at at a Ritzy high school outside Boston. And there was a kid probably 15 in the front row who was not buying what I was selling. He was looking at me very skeptically. And he put his hand up first and he said, If the FBI didn't stop you, would you have stopped making these trades? And I said, yeah. And then I thought, my God, I would not have stopped. It was the first time I was ever asked that question. And so when I get that question, it's Michael Collins: Wow. Tom Hardin: pretty provocative because you want to be able to rewrite history and say, Yeah, I had this moral epiphany one day. Hey. I would have called the woman tipping me, stop calling me with perfect information. Like that was never gonna happen. And it's very uncomfortable to say, yeah, if they didn't stop me, I would have kept doing it because my boss is looking the other way. I told myself they were small trades. And so now I look at it as like, wow, the FBI did me a favor by stopping me after four trades because it would have continued. Michael Collins: What are some of the common questions that you just hear every time? Tom Hardin: is there anything that would have stopped you from making that first trade? And I wrote about this a little bit, but I don't think maybe so much in the book. But I told myself everybody's doing it. she's calling me with a tip, I'll just do it one time. It's not really hurting anybody. Had I had

the right mentor and said, You won't believe what these people are doing. It's rampantly happening. I'm just thinking of taking a flyer, making a small trade. the right person would have slapped me around, Why would you ever do that? you already have a great firm, a great job, and a great role. why would you make that one decision? You're a good investor. You would never do that. I think just that one conversation would have been enough for me to hang up the phone, just checking my own rationalizations with somebody else. People also ask, you know, wasn't my boss saying something about these four trades? why didn't he say anything? And on each of the trades, we'd have these morning meetings with our portfolio. And it was some combination of, don't tell me how you're doing it or keep me out of it. So he was being willfully blind as my boss. So one of the lessons from my story with leadership teams is you have to ask questions about short term performance in any industry or some outlier like that. You can't assume everything is all good. ask what's happening behind the performance, not just looking at the performance Michael Collins: Yes, and I love that point about the mentor. I feel like that's especially important now where maybe culturally more people are working remotely, they're disconnected from the organization and from human connection with their superiors or from colleagues. So there's probably alignment issues can you talk a little bit how you came to a point where you were able to speak publicly about this, to write a book, to help others with your case. And I'm sure that must have been a process, like being that vulnerable and honest publicly about your situation. Tom Hardin: Yeah, I definitely didn't have a long term plan to become a professional speaker. and after my sentencing in twenty fifteen, there was a AP reporter that wrote a story about me. And that eventually led to me being on a podcast called the Rich Roll Podcast, And he reached out to me and I had been listening to his podcast and somebody heard or read this interview and I thought we were gonna have a coffee and he analyzed me to be on his podcast and I went to the hotel in New York and he's there with his equipment. So I ended up, Michael Collins: So men. Tom Hardin: behind the microphone telling essentially this conversation we're having, but actually in very even more vulnerable state because I had just been sentenced and I thought I had no idea what to do with my life. And it was the first time publicly, in my own words, I shared the story and I expected the reaction to be pretty negative, like This criminal, sharing his story. Instead, I heard from all kind of people. So there was finance professionals, parents, people who had never committed a crime, but who related to the failure, to the shame, to trying to rebuild a life or living with sort of two versions of themselves. And then one of the FBI agents on my case who I hadn't met, but he was the manager of the agents who were dealing with me, just happened to hear that podcast with Rich Roll And that's who 10 years Michael Collins: Wow. Tom Hardin: ago called me and invited me to speak at the FBI to the rookie agents. And so to speak alongside him, he had investigated the Martha Stewart cases, the Bernie Madoff cases, and told his war stories, and then had me come on stage and I spoke to these rookie agents and then they said, Why don't you go try to make lemonade or lemons? And I thought, All right, this would be nice, but I have to find a way to make a living. And they no, you're allowed to do this as training, and you're not glamorizing it. And so I started speaking at colleges as I write about just to get my reps in. And then eventually I think one conference or one company hired me and they said, How much do you charge? And I quoted them, and once they got paid one time, I told my wife, hey, you can quit your job. And she's like, Are you crazy? Like, how are you gonna make this work? And I just said, I have to make it work. I mean, there's no other choice. everything I've tried professionally has not worked since this. I have to make this work. Michael Collins: My goodness, you just recalled an example, a background check for I think it was coaching sports for your children, right. And what are your Tom Hardin: Yeah. Yeah. Michael Collins: thoughts on that? The ability of a background check or any sort of risk assessment to ruin somebody's ability to participate in such normal activities. Tom Hardin: Yeah, I wish there was more nuance to some of this and I think it's more of a troublesome issue if the person does not disclose something and it comes up in the background check, then I think they have a real credibility problem. You should be very cautious. But if somebody's gonna disclose something as I did to try to be a coach, so for context, my then five year old wanted me to coach her in soccer. She would only play, and that was my sport growing up, if I would be her coach. And I said, No problem, yeah, I'd love to coach you, but then to pass the background check. I had to check the box on the criminal conviction and I explained it to the commissioner. It's a nonviolent white-collar conviction, nothing violent, nothing with kids or anything like that. And so even disclosing it up front, and of course it came back. I guess there was an insurance company with the league, and it just the policy was like anybody with a felony could not be a coach. And so that was a tough moment. something else I'm working on today is called the federal expungement initiative, where every state has an expungement process for somebody who has really rehabilitated themselves from a crime. There's nothing like that federally. There's only a presidential pardon, which is very expensive and tough to get Michael Collins: Hmm. Tom Hardin: and very politically tented. so I wish there was a path for people like me who and not for everybody, not everybody rehabilitates

themselves. Some people are recidivist and go out and do something again, but for somebody who has rehabilitated themselves that they can go in front of a judge. And say, can we just get this sealed up for law enforcement, of course, but have the person, be able to coach their kids, have the person be able to have a bank account again. Because I'm actually debanked still in the FDIC Insured Bank to this day, because of that. And again, it's all Michael Collins: Goodness. Tom Hardin: my own decisions, but again, could we have a process for getting people out of the system who are still in the system who have made amends and have a judge look to the facts of the case and say, Yes, this person's rehabilitated. They can have a bank account, they can coach. So I think that's important. Michael Collins: Yeah, are there other blind spots that come up in companies, in the work that you do, other than what we've talked about with outside pressures or competitive dynamics or the lack of mentorship? other things that you find sort of correlate with bad behavior or ways to get ahead of that? Tom Hardin: Yeah, I think the biggest one is confusing having corporate values with having a culture that supports those values. So almost every company I speak at has, very good values written somewhere. integrity, accountability, respect, do the right thing. And I think those aren't really the interesting questions. Like they're sort of like normalized cookie cutter. And I would actually look at three things. Like what behavior gets rewarded at this company, because that's really what your culture is. It's not tone at the top. It's what behavior gets rewarded. number two, I would look at what happens to somebody who delivers bad news. are they thanked or are they scolded? And three, like, does leadership care about how the number was achieved or only whether the number was achieved? So you can have the best code of conduct, the best statement, the best posters on the wall in your industry and still create a culture where everybody knows that the rainmaker gets a pass. And so culture is ultimately I think what employees believe will be rewarded or punished or tolerated. Michael Collins: what's the advice to to to management and how to create that culture and and rethink those sort of boilerplate you know policies Tom Hardin: Yeah, I think it's sometimes unintended signals that leaders are giving out that may encourage like unethical behavior. the more you get promoted inside of an organization, I've seen this where you judge yourself by what you thought you were saying, and the employee can judge themselves on or judge the statement on what they think they hear, and there can be a disconnect. So most leaders who never say, break the rules, of course. that's not normally how it happens. They could say we cannot miss this quarter, or I don't care how you do it, just get it done. Or, failure isn't an option. They're trying to be motivational. Or they continually celebrate

the person who produces extraordinary results without ever asking how those results were produced. And so my own story was an example as I went through my boss said, He didn't say go get inside for information, but it was celebrated because he didn't want to know. and so I think leaders need to understand that ambiguity gets interpreted through incentives. And if the employee knows what result leadership desperately wants, an ambiguous instruction may sound much less ambiguous to the employee receiving it. Michael Collins: Right. Well, I'm sure that most of your advisory focuses on sort of proactive measures to prevent bad outcomes and unethical behavior. But are you fielding questions from folks that are wanting to know how to rebuild their reputation? If there's been a lapse with a company or a mistake made Tom Hardin: I don't think you can sort of talk somebody into trusting you again. I think the starting point is accountability. no excuses, no selectively edited version of what happened, some of these reputation management firms are sort of guilty of that, cleaning things up, making it like look less bad than what happened. And you just have to accept the consequence. and then repair what you can. and after that, just behave consistently for a very long period of time I think without demanding that other people recognize how much you've changed. because, trust isn't rebuilt through one grand gesture as companies might like to do. Or it's rebuilt through just hundreds of small experiences where your behavior matches your words. And so for an organization, I think the process is very similar. Like investigate honestly, hold people accountable consistently, including high performers. fix the systems that contributed to the failure. So many times it's like, let's find a bad apple and fire them. And we don't even look at the system that led to that, sort of like the Apple versus the barrel focus. you know, communicate to people what's changed around that. And then just prove it over time 'cause the hardest lesson for me was realizing that I don't get to dictate when somebody else trusts me again. Michael Collins: you made me think about the reputation management firms you mentioned the book reaching out to you, not even aware of the writing that you've done and the speaking on the topic, who are just, looking to transactionally advise you on how to rehabilitate, yourself or whatever. does that still Tom Hardin: Right. Michael Collins: happen today? Tom Hardin: I think there's a place for these firms, of course, but I find it funny I mentioned that and now they have their agents, obviously sending their AI bots with these emails out, but I'll get it, Mr. Hardin, we found something bad about you on the internet and they have a link to my case. And I'm sure for a certain price, they can move it down to page seven or page eight of my Google results. And I guess there's a business for people doing this. I'll up and Google people in these cases. Where

are they now? You know, there was eighty one people charged. And I think a lot of people move the bad stuff off or somehow wipe it. And I always have fun with these now. I reply and say, here's my tipperx.com website. Here's all the bad stuff. And then they'll get back to me and say, my gosh, it looks like the owner of tipper x dot com is using your name. Then eventually they stop emailing me. So I figured I like you Michael Collins: man. Tom Hardin: can either try to hide it, try to clear it, or just own it. And it's a lot easier for me at least, not speaking for everybody in my situation, but it was just a lot easier to one day just to own it after the FBI said you should try speaking. because for years I would tell people, I used to work on Wall Street, now I'm a stay at home dad. Hey, don't Google me. And if you have to say don't Google me, it's not great. So why not just own it? it's a lot easier. and I tell them don't take the bad stuff off. I have to keep it out there to keep speaking. But that's part just owning it and not trying to rewrite history or tell a different story. For me, that's how I could sort of hold my feet to the fire and just be totally accountable. Michael Collins: Yeah, and that must be the normal human reaction to controversy is just to shut down I'm so curious with all the speaking that you do and how plugged in you are to this world, what are the current challenges? What's unique about this moment in 2026? Tom Hardin: I think so starting with Wall Street, I think operationally it's significantly better than when I was trading. you have much stronger kind of restricted list processes for insider trading, more sophisticated trade surveillance, better monitoring of just communications, more structured, we talked about expert network, better escalation processes and in many firms, I would say compliance actually has more authority and much better technology. Regulators also have capabilities today that simply didn't exist when I was trading, but I'm much less convinced, sort of going around sharing this story with different industries, that I'm much less convinced that human behavior has even really changed. the risk has kind of migrated. And so fifteen, twenty years ago, it might have been You a hedge fund analyst getting a phone call. today you're dealing with alternative data, hacked information, remote workers, we mentioned, off-channel communications, global bad actors, prediction markets, and now sort of AI systems that can ingest, tremendous amounts of data without making the providence obvious. So I think the next kind of challenge for compliance is increasingly going to be this idea of information provenance. where did this fact come from? Who had access to it? Did they have the right to share it? Can we reconstruct the path afterward? And underneath all the technology, you still have exactly the same human drivers. You have pressure, you have rationalization. I haven't been able to stop that with people. We're

all gonna rationalize. You have social proof, you have fear, you have silence. technology, changes incredibly quickly and human beings don't. So the controls from what I've seen have become much more sophisticated, but unfortunately, so have the people trying to get around them. Michael Collins: Totally agree on the human nature dynamic being unchanged with the things that have changed in the market, you mentioned the prediction markets. What are your thoughts about the unique challenges there? And then another one, with fractional ownership and all these rules changing within sports, trying to regulate the behavior there. do you have any opinions on these sort of new industry changes? Tom Hardin: Yeah, I think with prediction markets, the surface area for insider trading has increased massively. I have a lot of friends that have particularly sons in college and they're all sports betting on Kalshi in college, and that's the end group. And then they graduate, go work at public companies, and maybe they can't trade their company's stock because of restricted information, but they go make a bet. They just say, Well, I'm making a bet on Kalshi and all of a sudden they're insider trading. So I think there's significant risk here. But I think, prediction markets, they obviously have real value. Markets can aggregate, dispersed information extremely effectively. But I would draw a sharp distinction, I think, based on the underlying event. So if thousands of unrelated people are forecasting an outcome that none of them controls, you can get legitimate price discovery and potentially very useful information. So whether economic outcomes, you know, we're speaking two weeks before the midterm elections, things like that. and the ethical issue changes, I think, when a very small number of people can either know the outcome in advance or influence the outcome themselves. So suppose you're allowing people to trade on whether, a government will take a particular military action and There are government officials and contractors who possess information nobody else does, or imagine extremely narrow sports prop bet markets we see where an individual participant can influence the outcome. So now you potentially move from prediction towards insider trading or manipulation. And we're already beginning to see regulators confront the problem at the CFTC. So my view is it's not my optic like prediction markets are bad. I would regulate at the contract level. If I was head of the CFTC for a day, I would ask, can somebody with privileged access know this outcome before everybody else? Can someone trading the contract influence the outcome? How difficult would manipulation be? What surveillance exists? And I think my basic test would be are we aggregating dispersed public beliefs? Or are we monetizing privileged access to the outcome? And it's the second one I think regulators should be extremely skeptical of. Michael Collins: you make me think what's changed on the regulator side? We talked about the modernization and sophistication of compliance folks in organizations and how that's evolved. do you feel that the regulatory environment has changed sort of the willingness or resources to investigate or to crack down on behavior in prediction markets or in finance or in crypto or some of the other far-flung Spaces. Tom Hardin: Yeah, I think there's obviously, it shifts with the political whims. and, right now there's an issue like the CFTC, especially with prediction markets, is much smaller than the SEC and doesn't have the case law you know, precedent looking back in these markets. So I think it's just a resource constraint right now where there have been cuts in all the three letter branches of the government. It sort of started last year with Doge and that stopped and now what's happening here. And so there's just less people. The people at the SEC are pulled many different directions outside their usual circle of competence. And so I think if we had more bodies, there would be more cases. I just think it's a resource problem right now. But also, especially with insider trading, you're talking about now potentially sophisticated bad actors who are not just tip or tip E, organized criminals around the world hacking system, getting information. trading it, we all still see it in the markets. And if the SEC they have like a two billion dollar enforcement budget going up against all the bad actors in the world, again, it's just a challenge. so a lot of the cases we see very small and I guess it just proves a point that they're still bringing cases, but they're very easy cases to bring. And I think the sophistication sometimes to bring these bigger cases is just a resource constraint right now. Michael Collins: And as if all that weren't politicized and controversial enough, thoughts on elected officials and their ability to Tom Hardin: yeah, I see. Michael Collins: trade stocks. I see I'm addicted to Twitter, so I constantly see sort of these aggregators that track the performance of stock trading by the most popular, well-known household names in the Senate and in Congress. Tom Hardin: Yeah, I mean, for me it's a pretty simple view. I don't think elected officials should be trading individual stocks while they're in office. And so I came from finance. If you're an investment banker advising, NVIDIA or another semiconductor company and you possess confidential information, like your employer isn't going to let you freely trade those stocks. And so everybody in business accepts that as a completely normal consequence of having privileged access. But a member of Congress can sit on a committee, receive briefings, participate in discussions about policies affecting an industry, and simultaneously own or trade individual companies affected by those decisions. Even if every trade is completely innocent, you've created an unnecessary conflict and an enormous appearance problem. So to me, this isn't primarily about

proving that a particular member of Congress committed insider trading. It's just about trust in the system. And my preference would be broad diversified index funds, ETFs, or just a generally blind arrangement for Congress people. And I would extend the restriction to spouses and dependent children because right now that's a very obvious loophole where we see it every week. So that should be not allowed. And then, you know, there can be legitimate debate on on on exactly how the law should be structured, but twenty-five bills have been introduced the past thirteen years out of the house. None of them have made it to a president's desk. Michael Collins: My goodness. Absolutely. There's so many implications for it, and it's worth noting for people that don't know that it seems to be on all ends of the political spectrum. what are you excited about lately? what are you working on? Tom Hardin: So for me, all of my inbound sort of comes for compliance and ethics training, finance, Fortune five hundreds. But all of my outbound reach now, I mentioned speaking to a few high schools. I've actually sent my book out to, you know, half a dozen or a dozen sort of high schools, prep schools especially for young men, like some of these all boys' schools, seventh to twelfth graders where I'm going in this fall and next spring. And so I'm really looking at expanding my speaking career beyond just professionals and speaking to even people before they're in college. And one of the things I shared with them when I spoke at a school is I said, guys, your work ethic, your talent, your reputation, that just doesn't add together for your success. It multiplies. you can have tremendous success in your life in your career. But if you put one bad choice in a multiplicative equation, what does a zero equal in that situation? And when I spoke to the school in Tennessee this spring and the seventh grader was like, well, anything by zero multiplied by zero is a zero. I said exactly. Think about what your zeros could be in your life, even today, and never multiply by zero. So I want to do more of these talks, these lessons, as the senior person now just going in and talking to young people about decision making and avoiding their own zeros. Michael Collins: Love that. yeah, I have to say, with the speaking, I spoke to a Fortune 500 chief compliance officer who raved about your talk in their organization. and I just can't recommend the book enough. I loved it. I read a lot and it was one of the best books that I've read in a long time. So in in closing, what did we miss? what else would you add? Tom Hardin: I guess maybe given sort of your line of work and background investigations and Michael Collins: Mm-hmm. Tom Hardin: due diligence, I think just one thing I would add around that is we spend a lot of time, I think, trying to answer, is this a good person or a bad person? my own experience has made me much less comfortable with that question. I'd also want to understand, how does this person behave under pressure? I would ask questions like, what happens when bad news threatens their status? who in their life or organization can challenge them? do they admit mistakes early? what happens when the rules interfere with something they desperately want? how do they explain exceptions? I read about in the book, character matters enormously and there's a gap between character and reputation, but I would say people ask me, what do you mean by character? I'd say, context reveals character and sometimes the most dangerous person, isn't the obvious bad actor, twirling their mustache in the corner. It can be the highly respected, highly successful person who has become exceptionally good at explaining, why this particular exception is justified. So that's one of the biggest lessons I took away from my own experience and from listening to other people while I was cooperating. and for investigators I think there's enormous value in learning to recognize the rationalization before it becomes the violation. Michael Collins: That is so powerful. can you talk about what you recommend for on understanding those things about a person? Is that sort of a qualitative exercise where there are, in-person meetings with people and reference checks, Tom Hardin: Yeah, I guess maybe hard to generalize, but I think if you were saying, Hey, how would you evaluate somebody's character? you're meeting them and yeah, there's nothing bad on the background check. if you find any situation where the person, cheats on the small thing, I say that they will cheat on the big thing. even like in the golf game or something, something like that's that that's a testament of the person's character, you know, and even something that seems so innocuous. It's human behavior. Michael Collins: Absolutely. Tom, thank you so much. I love this. I'm so grateful for you coming on. I hope you have a great rest of your day. Tom Hardin: Thanks so much, Michael. It was a pleasure.