I have a friend working at a hedge fund. He has asked me to make a trade with him after hours wherein he sells some stocks to me for much less than market price. He will be "losing" in effect more than 1 point per share and I will be able to sell it immediately for a 1 point profit. He will be selling these stocks from his hedge fund account (he works for the hedge fund). I don't quite understand how this will work out for the hedge fund, but he says that they have some complicated formulas that will make it better for them if they actually lose money on occasion. I know it will work for him since he has asked me to send him half of the profit. He only gets 20% of what profit he makes for the hedge fund trading their money. So if he loses $1000 to me then he only loses $200 in pay and I will reimburse him $500 so he will end up ahead and of course so will I. The question is - "Is this Legal ?" He insists that his hedge fund is OK with it, but I have my doubts- I just don't see how they can be better off losing $1000 - it is like losing $1000 and saying it is OK because it is a tax writeoff but in the end it is better to just keep the $1000 even if you pay taxes on it - right ? So please advise- I would like to make the extra money, but I do not want to anything that I could get in trouble for.