When it comes to secrets, Wall Street titans and Silicon Valley VCs see eye-to-eye

Secret secrets are no fun, secret secrets hurt someone.
Secret secrets are no fun, secret secrets hurt someone.
Image: Reuters/Jonathan Ernst
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Online anonymity: Great if you’re revealing secrets, terrible when someone else is revealing yours. And for investors, secrecy is sometimes the key to advantage, whether you’re plowing cash into private start-ups or an activist investor amassing public equities to bully management.

David Einhorn, the hedge fund billionaire, is in the latter business, and last year he lost his advantage: An anonymous poster on investment website Seeking Alpha revealed that a major investor—intimated to be Einhorn—was about to buy a big chunk of equity in Micron, a semi-conductor manufacturer. (The post appears to have been deleted from Seeking Alpha, but a twitter account with the same username tweeted the same information.) The price rose, and Einhorn’s attempt to sneak into the stock on the cheap failed.

Now, Einhorn is suing Seeking Alpha to force the site to reveal the user’s identity. While law-enforcement and intelligence agencies have already used subpoenas and less savory means to break through online anonymity when they suspect crime, this case could broaden the civil courts’ ability to finger social-media users.

The hedge-fund manager maintains that only someone who was legally obligated to keep the information confidential could have written the Seeking Alpha post, and he wants to know the person’s true identity in order to sue. Since the author of the note isn’t a journalist relaying information from an anonymous source (a classic way big deals are leaked) but an investor, it’s possible the judge won’t follow the usual protections for anonymous speech and instead force Seeking Alpha to divulge the author’s identity.

What’s this got to do with venture capital? Secret and Whisper, two new social-media services that allow users to broadcast whatever they want anonymously, have come under fire from venture capitalists like Marc Andreessen and Mark Suster as ethically questionable. Suster has been called a “fraud” on Secret, and an attack posted on Secret played a part in convincing a female engineer at GitHub, a company Andreessen invests in, to publicly discuss harassment that led her to leave the company.  

These apps are simply the latest entry in humanity’s long-standing obsession with gossip and anonymity, and so far they haven’t done much more than confuse Gwyneth Paltrow’s publicist. But if Einhorn’s suit leads Seeking Alpha to reveal the anonymous leaker, that precedent could make it impossible for Whisper or Secret to protect the identities of people who post things that might get the services in legal trouble, be those trade secrets, work-place shenanigans covered by non-disclosure agreements, or defamation—something Secret is clearly concerned about.

So if you’re an ardent believer in anonymity, be careful: If you reveal something important enough to be legally protected on one of these platforms, your anonymity might not be secure. The only secrets you can safely reveal on these platforms (and even then, only as long as they’re not crimes) are your own.