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U.S. Prepares to File Charges in One of Nation’s Largest Insider Trading Rings

Forbes is reporting that the United States government – including the Department of Justice and the Securities and Exchange Commission – has filed criminal charges against five defendants and civil charges against 32 defendants involved in a technologically-complex insider trading scheme. It is alleged that the involved individuals hacked into news sites that traditionally report on U.S. business mergers and acquisitions to gain information about upcoming business activities before this news would be released to the public. This gave the defendants an unfair trading advantage compared to other investors, enabling them to reap profits exceeding $100 million. This would make it one of the largest insider trading operations in the nation’s history.

What Is Insider Trading?

Illegal insider trading occurs when an individual accesses or obtains certain nonpublic information and then utilizes that information to buy or sell stock. It is as if the insider trader possesses the plot to a new movie before it is released or the final scores to a sports match before the game even begins. While possessing insider information itself may not be a crime, using that information to buy or sell stock is a crime and can result in criminal as well as civil charges.

The reason why insider trading is punished is because it gives the trader with insider information an unfair advantage in the stock market. An insider trader is able to make better decisions regarding whether to buy or sell stock than someone who does not engage in the practice.

What Are the Penalties for Insider Trading?

Insider trading can be punished with both civil and criminal penalties. The possible penalties and sanctions include:

Criminal Sanctions

  • Up to 20 years in federal prison; and
  • Up to $5,000,000 in criminal fines for individuals and $25,000,000 for non-natural persons (such as corporations).

Civil Sanctions

  • $1,000,000 in penalties or three times the amount of profit gained or loss avoided by the insider trading.

Elements of Insider Trading

In order to be convicted of insider trading, the government must show that an individual or non-natural person:

  • Purchased or sold securities;
  • While in the possession of material and non-public information;
  • In violation of a duty not to trade (in some cases).

It is important to note that the insider information possessed must be both “material” as well as “non-public.” “Material” information is generally defined as information that is substantially likely to be considered by a reasonable investor in making an investment decision.

Because insider trading cases tend to be supported by circumstantial evidence, it is important for defendants charged with insider trading to retain experienced white-collar criminal defense counsel. Attorney Jeffrey S. Weiner has successfully defended clients charged with white-collar crimes like insider trading. He understands that in these cases, the facts are important. He will conduct a thorough investigation of your case and identify information that is helpful to your defense and that casts doubt on the prosecution’s case. The sooner you contact the law office of Jeffrey S. Weiner, P.A., the better he is able to assist you. Contact his office today at (305) 670-9919 and schedule your free initial consultation.

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