The Securities and Exchange Commission had a very busy week, bringing several high-profile insider trading cases in a clear demonstration of its commitment to continue to aggressively investigate and prosecute illegal insider trading, including in the crypto space.
In the first case, the SEC filed insider trading charges against Stephen Buyer, a former U.S. Representative for Indiana’s 4th Congressional District, alleging that after having left Congress in 2011 he created a consulting firm that provided professional services to companies, including T-Mobile. The SEC further alleged that in March 2018 Buyer golfed with a T-Mobile executive from whom he learned of T-Mobile’s intention to acquire Sprint. Armed with this material, non-public information, the SEC’s lawsuit claimed that Buyer began acquiring Sprint stock the very next day ultimately amassing approximately $568,000 of Sprint securities in various accounts. When news of the merger leaked to the public, Buyer profited by more than $100,000, per the SEC Complaint. Buyer also traded on inside information ahead of another acquisition, through which he learned from his consulting position, and profited by more than $200,000, the SEC also charged.
Buyer is additionally facing parallel criminal insider trading charges out of the Southern District of New York.
In the second enforcement action, the SEC filed insider trading charges against three individuals in connection with their purchase and sale of crypto assets. The SEC charged a Coinbase manager, his brother and friend for engaging in a fraudulent scheme to trade in advance of announcements that certain crypto coins would be made available for trading on the Coinbase platform. This information was non-public and of critical importance as coins typically spike in value on such announcements. The defendants are alleged to have sold shortly after the announcements generating profits in excess of $1.1 million.
Not surprisingly, the federal authorities also joined the party, bringing criminal charges arising out of the same underlying conduct.
Finally, the SEC charged nine people in three separate insider trading schemes that collectively reaped $6.8 million in illegal gains. The significant, common-thread running through these cases — the SEC originated these investigations utilizing its data analysis tools, which are designed to identify suspicious, red flag laden insider trading patterns. The United States Attorney’s Office in Manhattan also filed criminal charges in these cases.
Four takeaways from the SEC’s burst of insider trading enforcement activity this week.
First, SEC’s long-standing enforcement priority of zealously prosecuting illegal insider trading remains firmly in place and, in fact, arguably may now be more important than ever in its enforcement hierarchy.
Second, the crypto space is the new frontier for the SEC’s insider trading enforcement. To the extent the SEC can successfully argue that crypto is a security under the U.S. Supreme Court’s Howey decision, there will be enough cases to keep SEC defense lawyers busy for the foreseeable future.
Third, the Department of Justice, particularly out of New York, will continue to do its part, hand-in-hand with the SEC, to prosecute insider trading cases thereby raising the stakes to include the loss of liberty for those who make the dicey calculus to trade on material, non-public information.
Finally, the SEC’s utilization of technology to crunch data to identify highly-suspicious trading will only increase and get better with time, inevitably generating more insider trading investigations and prosecutions.
Have You Been Investigated by the SEC’s Insider Trading Enforcement Program?
David Chase, Esq. of the Law Firm of David R. Chase, a former SEC prosecutor, is now an SEC defense attorney and represents individuals in SEC investigations nationwide. You may contact him toll-free at: 800-760-0912 or e-mail at: firstname.lastname@example.org, and can visit the Firm’s website for more information and content at: www.davidchaselaw.com.