Frank A. Rubino, ESQ.

FEDERAL AND INTERNATIONAL CRIMINAL DEFENSE

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High Profile Trial Begins In $67M Insider Trading Case, Part 1

A massive criminal prosecution is going to trial this week in a case that started two years ago with the FBI's raids on several prominent hedge funds. Authorities are accusing two fund co-founders of earning more than $67 million by engaging in illegal insider trading.

This insider trading case offers an opportunity to look at some aspects in big securities fraud cases. Today's post will look what constitutes insider trading. A follow-up post will talk about legal aspects of a common tool used in securities fraud investigations - wiretap technology.

Insider trading is the illegal use of nonpublic information that can affect the price of a given security if it became widely known. So there are two components of insider information: it must be private and it must be likely to affect the price of a security if it were to become public. It is against the law to use this kind of "material private information" to make a profit on the security markets. As this case demonstrates, authorities are very serious about insider trading.

In this case, eight defendants allegedly formed a club of financial professionals to trade this information to make money. Of those eight defendants, six have already pleaded guilty and only these two chose to face a jury trial.

Source: Bloomberg Businessweek, "Hedge Fund Co-Founder Faces Jury as FBI Raids Yield Trial," Patricia Hurtado, Nov. 7, 2012 

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Coral Gables Office

Frank A. Rubino, Esq.
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Coral Gables, FL 33134

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