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Insider Trading and Securities Fraud in Sacramento

Insider Trading and Securities Fraud in Sacramento

Securities fraud and insider trading are serious issues that can have major consequences for individuals and businesses in the Sacramento area. While some insider trading is legal, fraudulent activities can lead to criminal charges, fines, and imprisonment. This article will provide an overview of insider trading and securities fraud laws, discuss recent cases in Sacramento, and explain what to do if you suspect you are a victim.

What is Insider Trading?

Insider trading refers to buying or selling securities based on material, non-public information in breach of a duty of trust or confidence[1]. There are two main types:

  • Legal insider trading – This involves trading in securities by insiders of a company, such as directors or employees, based on material information that has been publicly disclosed. This is legal as long as proper reporting and disclosure procedures are followed.
  • Illegal insider trading – This refers to trading based on material, non-public information in violation of a duty owed to the source of the information. This could include trading by insiders without properly reporting, or trading by outsiders who misappropriate confidential information.

Illegal insider trading may involve stocks, bonds, derivatives, and other securities. Information is considered “material” if there is a substantial likelihood it would affect the decision-making of a reasonable investor[2].

What is Securities Fraud?

Securities fraud refers to deceptive practices in connection with the trading of securities. This could involve[3]:

  • Misrepresentations or omissions in SEC filings, financial reports, or investment pitches
  • Insider trading
  • Ponzi schemes – Recruiting investors by promising high returns through fraudulent investing
  • Pump-and-dump schemes – Touting a stock to inflate prices so insiders can sell shares at a profit
  • Churning – Excessive trading by a broker to generate commissions
  • Affinity fraud – Exploiting membership in a group to lure investment in a fraudulent scheme

Securities fraud erodes trust in markets and hurts investors. It is aggressively prosecuted by agencies like the SEC.

Recent Insider Trading Cases in Sacramento

The U.S. Attorney’s Office in Sacramento has pursued charges in several recent insider trading cases, including[4][5]:

  • In 2018, Congressman Christopher Collins was charged with conspiracy, securities fraud, and wire fraud related to passing insider information about a failed drug trial. He pleaded guilty and resigned his seat.
  • In 2011, Bob Nguyen of Stockton pleaded guilty to conspiracy and securities fraud for an insider trading scheme using confidential information from his brother, an employee at Intel.
  • In 2022, the SEC charged Marco Perez with trading on insider information about a biopharmaceutical company obtained from his friend who worked there. This case is ongoing.

These cases show insider trading prosecutions are active in the Sacramento area, even when the core misconduct happens elsewhere.

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Penalties for Securities Fraud and Insider Trading

The penalties for insider trading and securities fraud can be severe[1]:

  • Criminal charges – This may include substantial fines and years in prison. For example, the former Enron president Jeffrey Skilling received a 24 year sentence and a $45 million fine.
  • Civil penalties – The SEC can seek disgorgement of ill-gotten gains, fines, and barring participation in securities markets. In the ImClone case, Martha Stewart paid a $30,000 fine.
  • Private lawsuits – Defrauded investors can sue for damages. Class actions can result in massive settlements, like the $7.2 billion settlement by Enron.

Reputational harm and job loss often accompany formal penalties. Defending these cases requires experienced legal counsel.

How to Avoid Insider Trading and Securities Fraud

For individuals, key steps to avoid violations include[3]:

  • Not trading on confidential information obtained at work or through someone else’s job
  • Avoiding tips from insiders about non-public information
  • Reporting concerns about possible fraud up the chain of command
  • Being wary of “can’t miss” investments or “once in a lifetime” opportunities

For companies, best practices involve[3]:

  • Strong policies restricting information sharing and personal trading
  • Training employees on compliance
  • Monitoring trading around major announcements
  • Quick disclosure of market-moving information

Staying on the right side of these complex laws requires vigilance.

What To Do If You Are A Victim

If you suspect you are the victim of investment fraud[3]:

  • Don’t blame yourself – fraudsters can be extremely sophisticated and manipulative
  • Document issues – save account statements, emails, texts related to the transactions
  • Consult an attorney – they can evaluate if fraud occurred and options for recovering losses
  • Report concerns – notify SEC, FBI, state securities regulators to stop ongoing fraud
  • Be proactive – the sooner you act, the better the chances of holding wrongdoers accountable

The attorneys at [Law Firm Name] have extensive experience representing victims of investment fraud and insider trading in Sacramento. We can help you determine if you have a claim and pursue maximum recovery through litigation, arbitration, or negotiations. Don’t hesitate to contact us for a free consultation.


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