Insider trading is not new. A comment published in The University of Pennsylvania Law Review stated that after the ratification of the Constitution, Alexander Hamilton convinced Congress to redeem securities issued by the federal government at face value, despite many of them falling to around 10% of their initial worth. It’s said many other members of Congress also took advantage of this situation before the news reached the public.
While the ratification of the Constitution is not a crisis, it followed on the heels of many crises, and nonetheless paved the way for insider trading cases to occur throughout American history. This laid the foundation for modern white-collar crime.
In this case study, we’re looking at how insider trading may increase during times of economic crisis, and what you can do if allegations of white-collar crime have been placed on you.
While there is no specific law defining it, it’s generally delineated by insider trading lawyers and others as buying or selling securities (stocks, bonds, loans, etc.) in breach of duty, trust, or other relationship, based on nonpublic information about the security.
Simply put, it’s when someone has information not available to others with the same investments, and uses that information for their own profit, without telling the other parties involved.
Also Known as “White-Collar Crimes”
Due to the fact that there is no legal definition of insider trading, other cases, usually summed up as “white-collar crimes,” can also fall under this umbrella. White-collar crimes are, loosely, nonviolent actions taken for financial gain. They fall into the general categories of corporate, occupational, and transnational crimes.
This includes business crimes, from misdemeanors to felonies such as withholding information from investors or doctoring financial records. Depending on the severity of the crime, the punishment may vary and can include large fines, restitution, and sometimes even jail time. Due to the seriousness of the charges, it’s vital to hire an experienced insider trading defense attorney.
Before we turn to current events with COVID-19, let’s briefly re-visit the global economic crisis of 2007–2009 to help answer this question. When Congress finalized the $700 billion Troubled Asset Relief Program (TARP) to purchase assets from struggling lenders, the negotiations were done mostly in private by executives and government officials.
However, approximately one month before the TARP’s payments were distributed, those connected to the negotiations appear to have made a far larger number of trades than those in the dark. The connected also received far larger returns on their purchases and sales because they had access to more information.
Similar insider trading cases are already happening now. Just before an announcement from the Federal Reserve launching a plan to ease the global dollar crunch, the US dollar pared gains. Two Republican senators were recently criticized for selling large amounts of their stock after closed-door meetings about the coronavirus and just before the market crash.
Essentially, any time a crisis occurs, it opens the door for information that’s usually only available to a few, but has the potential to affect many, to be shared or withheld at the discretion of those who know it. If they choose to withhold information and make financial decisions that profit them, they’re in danger of being accused of a case of insider trading.
While the chances that you’re a government official profiting off coronavirus are minimal, there are other instances in which you may need an insider trading lawyer. The FBI takes white-collar and other such crimes very seriously, and it’s important to know that the crime doesn’t have to succeed to result in a conviction.
As such, your first vital step is to contact a professional insider trading defense attorney. Similar to other crimes, while the punishments mentioned above are severe, an accusation does not immediately indicate guilt.
Insider trading cases can hinge on not only proving a crime occurred, but that it was committed with intention rather than without conscious knowledge. If you were not aware you were committing a crime and can prove that, the charges may be dismissed.
Additionally, if you are able to prove entrapment by law enforcement, or were under duress, intoxicated, or incapacitated, there is also a possibility for dismissal. Your best chance at these circumstances is with an experienced attorney at your side.
If you’re involved in a case of insider trading or need legal assistance with related matters, Gammill Law can help. We specialize in white-collar crimes, so you can trust that we will take care of you from the first phone call to the first court date and beyond. Call us for advice, or contact us so we can expeditiously handle your legal needs.