Insider Trading Category Archives — Securities Fraud Lawyers Blog Published by Securities Fraud Attorneys

Under False Persona, Man Defrauds Investors of Millions

Published on: October 17, 2022 | by Savage Villoch Law, PLLC

In a stark reminder to thoroughly confirm your stockbroker’s background, the Securities and Exchange Commission (“SEC”) recently charged a California man with defrauding investors of millions of dollars by using a patently false persona. [1]

The SEC’s complaint charged Justin Costello with violations of the anti-fraud provisions of several federal securities laws as a result of his role in this massive fraudulent scheme. [2]

While the SEC’s complaint alleges a broad web of fraudulent investment schemes, Costello mainly operated through deceit about his background, his qualifications, and the value of the companies he owned and operated. [2] Throughout the span of his fraudulent schemes, Costello was never registered with the SEC as a broker-dealer nor investment adviser. [2]

SEC’s Efforts to Stretch 10b-5 Insider Trading Liability Survives Motion to Dismiss

Published on: February 7, 2022 | by Savage Villoch Law, PLLC

The SEC is attempting to broaden the scope of liability under federal insider trading laws, and it just secured its first incremental victory along the way.

The win comes as a newly formulated legal theory offered by the SEC survived a motion to dismiss in SEC v. Panuwat, a case proceeding in the U.S. District Court for the Northern District of California.[1] The SEC’s legal theory states that the practice of “shadow trading” constitutes a violation of federal securities law, namely Section 10(b) of the Exchange Act and Rule 10b-5.[1]

“Shadow trading” occurs when a person with a connection to one publicly held company uses material, nonpublic information (MNPI) they have gained from their connection with that company to inform their trading decisions in a separate publicly held company. Typically, this separate company is economically connected in some way to the company for which the person possesses MNPI. [2]

Insider Trading in Congress: Ethically Questionable, or Acceptable?

Published on: January 31, 2022 | by Savage Villoch Law, PLLC

When it comes to insider trading, corporate executives are often the first offenders that come to mind. Recently, however, public attention has shifted toward the investing activity of members of Congress as potential instances of illegal insider trading.

Members of Congress are inherently privy to more information about in-process legislation, forthcoming policy shifts, and potential economic impacts than the average market participant. [1] Such “insider” knowledge is a direct result of the duties entailed in a lawmaker’s job, and some argue this insider position presents an unmistakable conflict of interest. [1]

Congress previously sought to address this conflict of interest with its passage of the Stop Trading On Congressional Knowledge (“STOCK”) in April 2012. [2] At its most distilled, the STOCK Act explicitly made congressional insider trading illegal, and put in place disclosure requirements for each individual stock trade made by a member of Congress. [2] Prior to the passage of this law, insider trading – that is, trading by members of Congress based on material, nonpublic information – had been perfectly legal. [2]

As Peloton Plummets, What Can Investors Learn From Insider Trading?

Published on: January 24, 2022 | by Savage Villoch Law, PLLC

Peloton Interactive Inc. (“Peloton”) is making headlines this month – but not for the reasons its shareholders might hope. After reaching a peak of $162 per share at the height of the COVID-19 pandemic in December 2020, Peloton’s share price now sits at just $27. [1]

While the driving factors behind this downturn are many, the impact of the pandemic is undeniable. As an at-home exercise equipment company with the ability to connect users from their homes across the world via real-time classes, it’s no wonder the company and its stock soared through 2020’s COVID-19 lockdowns. Less clear, as of now, is Peloton’s staying power as consumer demand wanes, leading the company to hire consultants at McKinsey & Co. to review finances and to halt production on several of its models. [2]

In light of Peloton’s precipitous fall, some have turned their attention to massive stock sales undertaken by Peloton insiders before the downturn began. SEC filings from late 2020 and into 2021 show that insiders at Peloton sold approximately $500 million in stock before the price began to plummet. [3]