Insider trading, as you may suspect, is illegal but this doesn’t stop many investors from trying. This illegal activity happens when an investor buys or sells a stock in violation of fiduciary duty, trust or confidence using non-public information. The SEC stays very busy investigating allegations of insider trading, with hundreds of cases ongoing at any time of anyone from hedge fund managers and attorneys to corporate insiders and brokers.
Let’s take a look at some examples of high-profile insider trading cases that have been investigated by the SEC:
Chilean Business Associates Bilk $10 Million from Investors
Juan Cruz Bilbao Hormaeche and Tomás Andrés Hurtado Rourke, two business associates in Chile, were charged with insider trading on December 22, 2014. Total losses for investors were $10.6 million involving the exploitation of highly confidential information from CFR Pharmaceuticals.
Corporate Attorney and his Wife Brought up on Charges
A California-based attorney and his wife were charged with insider trading in December of 2014 based on information received from a corporate client. Shivbir Grewal was acting as independent counsel to Spectrum Pharmaceuticals when he sold his investment upon learning about a significant decline in expected revenue on a top-selling drug. He did this just two days before the official announcement. He notified his wife Preetinder Grewal to do the same, and she followed suit, selling all of her shares in Spectrum as well.
Wells Fargo Employees Involved in Short Selling Ahead of Published Reports
In September 2014, the SEC charged two former Wells Fargo employees involved in an alleged scheme to profit by buying or short selling a stock ahead of research analyst reports that were purported to feature a ratings change. New reports come out every time an analyst changes his or her rating, so when Gregory T. Bolan Jr. — research analyst at Wells Fargo – found out about this, he told a trader at the same firm, Joseph C. Ruggieri, of the change. Ruggieri made out with more than $117,000 in profits.
Bank Exec Charged with Insider Trading Before Acquisition
A Massachusetts bank executive and an associate were charged with insider trading on a deal that happened prior to a bank’s acquisition of another bank. Patrick O’Neill was a senior vice president at Eastern Bank when he found out his employer was making plans to acquire Wainwright Bank & Trust Company. He then tipped off his friend Robert H. Bray, who then sold off all his shares in other investments to gather enough money to buy big into Wainwright securities. He was cast in suspicious light when his profits increased by $300,000.
If there’s one thing these stories have told us is that insider traders tend to get caught. If you have been the victim of insider trading or stock fraud, become familiar with a stockbroker fraud attorney who can help.