Online investors face federal charges over insider trading claims

Insider trading allegations typically involve someone with information about a business or a major transaction either using that information for personal financial gain or sharing it with others who then use it for investing purposes. Those who work in executive roles at big businesses could share information about an upcoming merger or acquisition, for example, which would have massive implications for the stock values of the companies involved.

Although most people associate insider trading with traditional banking and financial professionals, digital assets and the systems used to trade them are as vulnerable to insider trading issues. Although it was a first, July saw the Department of Justice announce charges against three professionals working at a well-known cryptocurrency trading platform.

Why would digital assets lead to insider trading allegations?

Digital assets like cryptocurrency are largely speculative investments with a value that fluctuates significantly. Factors like how well people know about them and how easily people can access or produce those digital currencies will influence how much specific kinds of digital assets are worth.

The allegations related to the three professionals from a cryptocurrency trading platform called Coinbase involve sharing information with outsiders before company announcements. Specifically, with at least one of the accused, there are allegations that the professional used a hidden mobile phone to pass information to a family member and other acquaintances regarding the addition of new forms of cryptocurrency to the Coinbase platform.

The other parties could then purchase the currencies in question with the certainty that their value would soar when they became publicly available on the Coinbase platform. Insider trading manipulates the financial markets and creates unfair opportunities for some individuals to game the system, and even offenses related to digital assets could lead to federal charges.

White-collar criminal crimes are not minor offenses

An allegation of insider trading is not just a potential slap on the wrist. It could mean losing the licensing and insurance that a professional requires to do their job. It could also mean real damage to the reputation of the company that employs that individual. Someone who pleads guilty or gets convicted of insider trading offenses could face massive fines and incarceration.

Learning more about common white-collar criminal offenses will help you avoid breaking the law unintentionally or putting yourself at risk of prosecution through behavior that you don’t realize is illegal.