Maybe those regulations only apply to the exchanges.
Tangentially I read about an interesting money laundering technique once. Apparently you can take two low-volume stocks and use them to launder money by effectively committing financial fraud against yourself. It works like this:
1) Take a small amount of clean money and average into a position on a cheap low-volume stock.
2) Take the dirty money and use it to pump the stock by buying in and driving it up.
3) Sell your position on the clean side. Then pick another low-volume stock and do the same again.
Apparently variations of this technique can be used to smurf money across the market. You'll lose some in the transfer but that's cost. The dirty money appears to be "lost" in the market, while the clean side books short-term capital gains. I'm sure experts would know how to calibrate their smurfing rate to avoid SEC scrutiny and minimize side-channel losses. Seems like something that could be automated with an algorithm.
The illegal drugs industry kicks off such obscene profits that there's probably an enormous market out there for creative ways to launder it all.
I Think this is close to what he was doing. He had an investment bank friend that would just constantly sell and buy on the stock to look like there was "activity". In the end it was the same person selling and buying massive amounts of stock.
