Blog: Snapchat May Not Be Just for Friends – How About Insider Trading?

by Dylan Denslow, Associate Technology and Public Relations Editor

          Since its launch in September 2011, Snapchat has amassed some 26 million users who together send an average 400 million “snaps” each day.[1]  To say the app is popular is an understatement.  However, Snapchat’s reputation has been primarily as an outlet for teenagers and college students to send scandalous or embarrassing photos of themselves.  Recently however, a new app named Confide has taken the idea behind Snapchat, the notion of a disappearing message, and brought it to Wall Street.[2]  

            Confide is a “new ‘off-the-record’ messaging app” that has raised $1.9 million in seed funding, and was initially referred to as “Snapchat for business”.[3]  Business people commonly run into a situation where they do not want to create a paper trail of emails discussing a particular subject – instead they prefer to talk over the phone where their discussions aren’t recorded and may not bring about as many legal consequences.  Confide is meant to alleviate this situation where phone tag is frequent and an unnecessary impediment to transacting business.[4] 

            On its face, this seems like a great idea that could cure business problems faced on a daily basis.  However, the app is ripe for abuse and potentially provides a mechanism by which employees may be able to skirt or break state and federal laws.  Insider trading immediately comes to mind.  For example, an executive with a stock tip could send a message through Confide to an investor knowing that the record of that message would soon disappear.[5]  The messages sent on Confide are not stored on servers, and the company has put in place protections to avoid users taking screenshots of the messages themselves.[6]  This seems like a perfect mechanism to help exec’s and employees send messages without worrying about later consequences of their statements.

            Although geared towards the business world, it is also likely that the app will eventually fall into other hands as well.  This in itself creates a number of potential legal issues.  For example, imagine a drug dealer with use of the app.  No longer is there a record of his texts to buyers, instead his messages are deleted immediately, making it more difficult for law enforcement to connect him with his past activities.  Although this violates the terms of Confide’s user agreement, it is unlikely that such an agreement would deter someone already involved with such criminal activity.[7]

            Snapchat has certainly brought value to its users, primarily through its ability to allow them to share fun experiences.  However, there have already been allegations that Snapchat is being used for insider trading, even when its reputation typically involves a drunken “selfie” at a bar or college party.[8]  Now, Confide brings a similar product to market specifically geared at the business community.  A user agreement prohibiting illegal activity will not be enough to deter law breaking.  As this technology moves into the business arena, messages will have more serious financial effects than the seemingly harmless Snapchats.  Lawmakers should be poised to monitor and regulate use of this technology in order to avoid any potentially serious legal issues that may arise.