NBA Information Arbitrage

"By having this non-public information, I was in a unique position to predict the outcome of NBA games. Some of my picks included games I had been assigned to referee." - Tim Donaghy

Really Tim? You were able to "predict" the outcome of NBA games because you had non-public information? No $hit! How else can anyone make money in any "market"? Either you're lucky or you have more relative information than other market participants. This "edge" may help your predictions, but nothing is more powerful then simply blowing your whistle when a play is not in your favor. Tim you didn't just have inside information, you CREATED information (allegedly........sometimes I have to cma).

I've always contended that sports markets are more efficient than the equity markets. There is a lot more transparency. You don't have to worry about funny accounting or corporate scandal. Every major media outlet publishes sports scores, odds, and injuries daily. Most people are more informed with regards to sports than stocks. If you don't believe me, try this simple experiment. Ask someone.....where is GOOG trading, then ask.....who is leading the National League. More people would say the Mets than $487.18.

I'm not so much concerned with Tim's inside information. As a somewhat believer in APT, eventually this information gap will be arbed away.....usually quicker than one can realize any gains.

As repulsive as it is, I could potentially grow to forgive Tim for using his edge. However, having a ref purposefully affect the outcome of a game is the ultimate disgrace. Players gambling on/against themselves is horrible. But a REF! A REF? A supposed, independent, neutral arbiter. I'm disgusted!

And to think......none of this would have come to fruition if the Feds were not investigating the Gambino crime family in Brooklyn. They stumbled upon Tim and contacted the NBA. All for what?

Let's look at the numbers:

• Gamblers at first agreed to pay Donaghy $2,000 for each correct game pick and later boosted the payment to $5,000
• Investigators believed Donaghy made at least $30,000 from December to April
• Donaghy was free on an unsecured $250,000 bond
• He also faces a maximum prison sentence of 25 years, $500,000 in fines and might have to pay a still undetermined amount of restitution to the NBA

Some reports claim that Tim was providing "tips" since 2003. How much money is that? If one team plays ~80 games a season and Tim refs every game, we could estimate 5 seasons or 400 possible games. Let's say that he has some "edge" on 1/2 the games and is correct 90% of the time (i know that's impossible, but we are making an assumption about his edge). This would mean that Tim could supplement his $200k+ annual salary with $900,000* over 5 years. That brings his total annual compensation to $380,000 a year. What a f*cking idiot!**


* 400 games * 1/2 edge * 90% accuracy * $5,000 per game = ~$900,000.00
** $380k - (25 years * annual prison salary) - (costs associated with running from the mob) = ~ $0.00