Federal Insider Trading Defense Lawyer
Federal insider trading investigations are aggressive, complex, and often highly publicized. If you are accused of insider trading, you may be facing criminal charges, SEC civil enforcement actions, asset forfeiture, and potential federal prison time.
Insider trading cases typically involve allegations that someone used material, nonpublic information to buy or sell securities for financial gain. Federal prosecutors and the Securities and Exchange Commission take these cases extremely seriously.
Early intervention by an experienced federal criminal defense lawyer can significantly impact the outcome.
Your best chance for a favorable outcome is with an experienced criminal defense attorney at the Hedding Law Firm in Los Angeles. To schedule a consultation, call (866) 986-2092 or use the contact form here.
What Is Insider Trading?
Insider trading generally refers to buying or selling securities while in possession of material, nonpublic information.
Material information is any information that could influence an investor's decision to buy or sell a security.
Nonpublic information is information that has not been made available to the general public.
Example of Insider Trading
If someone learns from an inside source that a company will soon be acquired and buys stock before the public announcement, only to profit after the stock price rises, prosecutors may view that as insider trading.
Federal Laws Used in Insider Trading Prosecutions
There is no single federal statute titled “insider trading.” Instead, prosecutions are typically brought under:
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Securities Exchange Act of 1934
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Rule 10b-5
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18 U.S.C. § 1348 (Securities Fraud)
The government must prove deceptive conduct and misuse of confidential information.
Types of Insider Trading Cases
Corporate Insider Trading
Corporate executives or employees who trade based on confidential company information.
Tipping Cases
A person with inside information shares it with another person (a tippee), who then trades on that information.
Misappropriation Theory
A person misuses confidential information in breach of a duty owed to the source of that information.
What the Government Must Prove
To secure a criminal conviction, federal prosecutors must generally prove:
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The information was material
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The information was nonpublic
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The defendant knew it was confidential
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The defendant breached a fiduciary or similar duty
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The defendant acted with intent to defraud
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Interstate wires or securities markets were used
The burden of proof is beyond a reasonable doubt.
How Insider Trading Investigations Begin
Federal investigations often begin with:
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SEC trading pattern analysis
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Suspicious transaction reports
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Whistleblower complaints
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Corporate internal investigations
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Grand jury subpoenas
The SEC and Department of Justice frequently work together in parallel investigations.
Potential Penalties for Insider Trading
Criminal penalties can include:
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Up to 20 years in federal prison
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Criminal fines up to $5 million for individuals
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Restitution
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Forfeiture of profits
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Supervised release
Civil penalties imposed by the SEC may include:
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Disgorgement of profits
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Civil monetary penalties
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Officer and director bars
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Trading prohibitions
Federal sentencing guidelines consider:
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Amount of profit or loss
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Number of trades
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Role in the offense
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Obstruction of justice
Defendants in federal custody typically serve approximately 85 percent of their sentence.
Defense Strategies in Insider Trading Cases
Every case depends on specific facts and communications. Potential defenses may include:
Information Was Not Material
If the information would not significantly impact a reasonable investor's decision, it may not qualify as material.
Information Was Public
If the information was already available through public sources, it may not meet the nonpublic requirement.
No Fiduciary Duty
If no duty of trust or confidence existed, the prosecution's theory may fail.
Lack of Intent
The government must prove intent to defraud. Innocent trading decisions or coincidence may not constitute a crime.
No Personal Benefit
In tipping cases, prosecutors must often prove the insider received a personal benefit for sharing information.
Pre-Indictment Representation
In many insider trading cases, there is an opportunity to intervene before formal charges are filed.
An experienced federal defense lawyer can:
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Meet with prosecutors
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Present exculpatory evidence
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Clarify misunderstandings
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Negotiate to avoid indictment
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Explore cooperation or resolution options
An early strategy can sometimes prevent charges or significantly reduce exposure.
Custody and Release Considerations
If charges are filed, a key issue becomes whether you will remain free pending trial.
Federal courts evaluate:
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Risk of flight
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Financial resources
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Ties to the community
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Criminal history
Securing pretrial release allows defendants to continue working, supporting their families, and preparing their defense.
Frequently Asked Questions
Is insider trading always criminal?
Not necessarily. Some cases are handled as civil SEC enforcement actions. Criminal charges require proof of willful intent.
Can I be charged if I did not work for the company?
Yes. Tippees and third parties can face charges if they knowingly traded on inside information.
Will the SEC contact me first?
Often, yes. You may receive a subpoena before criminal charges are filed.
Can cases be resolved without trial?
Many federal cases resolve through negotiated agreements, depending on the strength of the evidence.
Why You Need an Experienced Federal Defense Attorney
Insider trading cases involve complex financial analysis, electronic communications, trading data, and expert testimony. Prosecutors often dedicate significant resources to these investigations.
A skilled federal criminal defense lawyer can:
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Analyze trading records
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Challenge the government's expert conclusions
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Negotiate with federal prosecutors
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Develop mitigation strategies
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Protect your rights during SEC and grand jury proceedings
If you are under investigation or have been charged with insider trading, do not speak to federal agents without legal representation. Early legal action can shape the direction of your case and protect your future.
The Hedding Law Firm is here to help. Schedule your consultation today. Our law firm is based in Los Angeles, CA
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