Insider Trading in the Age of Social Media.

It’s a general principle of federal securities enforcement that possesses material nonpublic information alone does not establish insider-trading liability. The possession and the use of such information are two separate elements.Federal insider-trading liability is generally enforced under Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. Under these provisions, prosecutors and the SEC can pursue liability on either “classical” or “misappropriation” theories:

• Under the classical theory, an insider (or someone receiving information from an insider) can be held liable for trading on material nonpublic information in breach of a fiduciary duty.
• Under the misappropriation theory, liability requires both possession of material nonpublic information and a breach of a duty. This breach can involve misappropriation of the information for personal gain, either in violation of a fiduciary, contractual, or comparable duty.

While these theories provide an overview, the federal insider-trading enforcement regime is complex, and its nuances have practical implications. The legal definitions of material nonpublic information, misappropriation, scienter, and “personal benefit” all are critical to determining when, if, and why insider-trading charges are warranted.

• Scienter is “a culpable purpose to mislead, manipulate, or defraud.”
• Personal benefits include “pecuniary gain or reputation that can be converted to future earnings.”

The SEC and the Department of Justice use these and other frameworks to enforce Section 10(b) and Rule 10b-5. Civil insider-trading enforcement actions brought by the SEC can involve remedies such as disgorgement, interest, statutory penalties, injunctions, and leadership and board-member bars.

Q: When is a Social Media Post Still Legally Nonpublic?

Can social media posts be used for public disclosure?

The SEC, such as in its release in 2013, has affirmed that “the use of social media channels by issuers, issuers’ executives, or issuers’ representatives is an acceptable form of public disclosure . .. provided that the issuer (i) adequately notifies investors that it will use the social media channel for public disclosure, and (ii) uses a social media channel that is a recognized channel of distribution for such information.”

However, availability of the information on the open web is just one factor in determining whether information has been adequately disseminated to the investing public. In other words, there can be circumstances where an issuer may choose to use a “social media channel that is available to the public” but “is not accessible to all investors.”

With regard to this last point, insiders must provide investors “adequate time to act on information” before they themselves make any trades. This is true even when an issuer releases an SEC filing on social media. In SEC v. Texas Gulf Sulphur Co., 401 F.2d 833 (2d Cir. 1968), the court held that an insider must wait until the news “could reasonably have been expected to appear over the media of widest circulation” before trading.

As a result, a social media post may remain legally nonpublic even after it is released onto the internet in scenarios such as:

• The issuer does not have a policy of using the social media channel for public disclosure.
• The post is restricted to a “private group.”
• The post was not adequately disseminated to the investing public.
• Insiders trade immediately after the information is released on social media, without waiting for reasonable dissemination to the investing public.

Q: Does the Law Require Information Parity Among Traders?

The short answer is no. Federal securities laws do not impose “general informational parity among traders.” The fact that one trader has information before another trader does not necessarily create a violation of securities law.

Furthermore, as a practical matter, some investors are willing to pay for faster delivery of information. This often involves paying to receive information that has been released to the public in a more traditional manner. For example, in August 2026 reports, it was described how “some traders were paying thousands of dollars for the ability to receive posts from Donald Trump’s Truth Social account as quickly as possible.” This form of “paid early access” may be permissible under federal securities law for various reasons, including that the information was delivered by the issuer to the public at large. And simply paying for fast delivery of a public post does not impose a fiduciary duty between the party providing the delivery and the trader receiving the post.

Q: Does the Fact That Information Comes from the Government Prevent Insider Trading Liability?

Not necessarily. Information about government actions can still be subject to liability under a “duty-based” or “deceptive” theory of liability. While federal insider-trading laws often require a fiduciary relationship or misappropriation, the information can also be “deceived from the government or another individual.” In this respect, the law has been applied to nonpublic information about:

• U.S. patent litigation
• U.S. patent law changes
• FDA approvals
• Federal court rulings
• SEC enforcement actions

Can Direct Messages and Group Chats Create Tippee Liability?

Q: Can Direct-Message and Group-Chat Tips Trigger Liability?

Direct-message (DM) tips and group-chat tips undergo the same Dirks analysis as tips from traditional sources. With respect to liability, the core inquiry is whether an insider or “tipper” breached their duty for a “personal benefit.”

If an insider’s social media handle makes them a prominent investor or analyst in a particular sector, does this elevate a follower or direct-message recipient to a “confidential relationship” as a matter of law? Not necessarily.

Q: What Are the Requirements for Tippee Liability in Direct-Message and Group-Chat Cases?

To establish liability for a tippee, it must be established (i) that the tipper breached a fiduciary duty or other duty of trust or confidence, (ii) that the tippee knew or should have known of this breach, and (iii) that the tipper received or sought a personal benefit from the disclosure. The last prong of this analysis is often the most complex part of any insider-trading case.

Q: How Does the Law Assess the Materiality of Information in Direct-Message and Group-Chat Cases?

The assessment of materiality is similar to the assessment of materiality in other contexts. The Supreme Court established the “Basic test” for material, nonpublic, contingent information. Under the Basic test, the materiality of information concerning contingent events is assessed by balancing the probability of the event occurring against the anticipated magnitude of the event’s impact if it does occur.

Regarding social media, emojis, “likes,” and reposts are social media hallmarks. Do they establish materiality? Not on their own. In this context, emojis, “likes,” and reposts will be evaluated in light of the “total-mix” of information available to investors and other contextual factors.

Q: What Constitutes a “Personal Benefit” in Insider Trading Cases?

While personal benefit requirements can trigger liability in a wide range of scenarios, the most common examples include cash, the opportunity to engage in a reciprocal trade, or gifting confidential information to a trading relative. For example, in Salman, the Supreme Court affirmed that gifting confidential information to a trading relative satisfies the personal benefit requirement without any need to prove that the insider received a pecuniary benefit in return.

Q: How Is the “Duty of Confidentiality” Established in Insider Trading Cases?

The duty of confidentiality is established based on a “totality of the circumstances” analysis. For example, in Panuwat, the court affirmed a duty based on the defendant’s (i) violation of a company policy, (ii) violation of a confidentiality agreement, and (iii) status as an agent of the company.

Various other circumstances can be sufficient to establish a duty of confidentiality as well. For example, in one case, a remote-working executive’s husband earned $1.76 million by allegedly overhearing discussions about a pending acquisition. While the husband may not have had a direct duty of confidentiality, he may have inherited the duty by “misappropriating” the information.

Spodek Law Group, led by managing partner Todd Spodek, defends clients in federal criminal and white collar matters.

How Do Investigators Reconstruct Social Media Insider Trading?

Q: What Do SEC Investigators Seek to Uncover in Social Media Insider Trading Inquiries?

In social media insider trading inquiries, SEC investigators seek to uncover (i) what suspected traders knew about securities, (ii) when suspected traders learned about securities, and, (iii) what the source of their knowledge was. These are key elements of the evidentiary case.

Q: How Does the SEC Obtain Evidence for Social Media Insider Trading Inquiries?

The SEC obtains evidence through various means, including subpoenas. The scope of the evidence it seeks is broad and can include social media messages, text messages, calendar information, financial records, brokerage statements, and emails. These are and other pieces of information can be examined and combined to build circumstantial evidence that supports allegations of insider trading.

Q: What Happens After the SEC Obtains Evidence of Possible Insider Trading?

After reviewing the evidence it has obtained, SEC investigators commonly question suspected traders and other individuals under oath. These individuals may be required to share their social media credentials to give investigators access to their accounts.

Q: What Is the Scope of Insider Trading Enforcement in the United States?

The SEC is the primary authority for federal insider-trading enforcement in the United States. However, insider-trading matters can also produce simultaneous civil and criminal proceedings. In such cases, the SEC will litigate against the defendant on behalf of the government while the Department of Justice (DOJ) will prosecute a criminal case against the defendant.

Q: What Are the Rules for Disappearing Messages and Disappearing Content?

While disappearing messages and other disappearing content have become a feature of certain social media platforms and messaging apps, they do not override the legal obligations of regulated firms. Regulated firms continue to have recordkeeping obligations that apply when using platforms such as WhatsApp and Signal.

With respect to individuals who must preserve certain information, destroying relevant information can lead to liability under Federal Rule of Civil Procedure 37(e). Rule 37(e) authorizes a court to impose sanctions and other remedies when electronically stored information is “lost because a party failed to take reasonable steps to preserve it.” These sanctions can apply to parties that use disappearing-message features to circumvent their legal obligations.

Q: What Role Does Metadata Play in Social Media Insider Trading Inquiries?

Metadata can be a powerful tool for investigators. Platform metadata may reveal what information a user posted, when they posted it, when they deleted a post, what they changed when editing a post, and when they accessed their account. Like other forms of information, metadata can play a key role in establishing a timeline of events and reconstructing an individual’s knowledge and intent.

Q: How Can a Defendant’s Scienter Be Proven in Social Media Insider Trading Cases?

The law identifies various factors that can establish a defendant’s scienter in social media insider trading cases. These factors include (i) the timing of the defendant’s trade, (ii) communications with suspected tippers, (iii) any attempts at concealment, and (iv) unusual trading patterns. When combined, these factors can be used to prove the defendant’s scienter in cases where explicit evidence of fraudulent intent does not exist.

When Does Social Media Trading Become Market Manipulation?

Q: When Does Social Media Activity Count as Market Manipulation?

Coordinated social media activity can count as market manipulation. When a group of investors all post about a particular security at the same time, this is common. With respect to liability, the core inquiry is whether this coordination is part of a “deceptive trading scheme.”

While coordination or strategic timing alone do not necessarily establish a deceptive manipulation scheme, they can be one piece of the evidence that triggers liability.

Q: What Constitutes a “Deceptive Trading Scheme” on Social Media?

A “deceptive trading scheme” is defined as a coordinated effort by a group of investors to “control an issuer’s price through interdependent trading and propaganda.” While social media can play a role, there are limits to what triggers liability. For example, in one case, the court rejected a claim of a deceptive trading scheme because the “strategic timing” involved “only a relatively small number of shares compared to what the investors themselves had available.”

Q: Can Social Media Activity Be the Basis of a Pump-and-Dump Scheme?

Yes, false social media promotions and coordinated trading schemes can form the basis of a pump-and-dump scheme. These types of schemes are actionable under Rule 10b-5.

Additionally, coordinated social media activity that induces other investors to trade as a result of artificial market activity can lead to liability under Section 9(a)(2) of the Exchange Act.

Q: Does the Use of Social Media Platforms Provide a “Safe Harbor” Against Manipulation Charges?

No, the use of social media platforms does not provide a “safe harbor” in all cases. For example, the SEC can bring manipulation charges for social media use involving government officials’ posts, such as the Truth Social post mentioned in United States v. Akridge. Rule 10b-5 manipulation claims still require evidence of deceptive conduct and scienter.

Q: How Does Timing Affect Allegations of Social Media Insider Trading?

Suspicious timing is a key factor in many social media insider trading cases. However, suspicious timing is not always sufficient to establish liability. For example, if an investor did not possess material nonpublic information at the time of their trade, then suspicious timing, by itself, is not sufficient to establish insider-trading liability.

This is because suspicious timing does not substitute for proving all of the elements of insider trading.

We provide comprehensive defense services for individuals and companies in federal insider-trading inquiries and enforcement actions. If you need to speak with a federal insider-trading defense attorney, please contact Spodek Law Group today.

How Should Companies Handle Executive Social Media Disclosures?

Q: What is the Difference Between Regulation FD and Rule 10b-5?

Regulation FD and Rule 10b-5 are two separate (though not entirely distinct) rules. Regulation FD governs issuer disclosure of securities, while Rule 10b-5 governs fraudulent conduct in the sale of securities. With this in mind, Regulation FD does not impose liability for fraudulent conduct. It imposes liability for failing to meet notice and timing obligations when disclosing nonpublic information.

Q: What Happens When an Issuer Accidentally Makes a Selective Disclosure?

When an issuer makes a selective disclosure on social media, Regulation FD requires the issuer to disclose the nonpublic information to the investing public as soon as reasonably practicable. When doing so is not reasonably practicable, the issuer has up to 24 hours or the next morning of trading, with the later of the two applying in most cases. This is a matter of 17 C.F.R. §243.101(d).

Q: Can an Issuer Simply Delete its Selective Post?

Deleting a selective social post does not independently satisfy Regulation FD. The issuer must additionally make the nonpublic information available to all investors.

Q: What are some Effective Executive Posting Protocols for Social Media?

Companies can protect against insider-trading liability and Regulation FD liability by establishing executive posting protocols. Effective protocols can include designating executives’ social media handles that will be approved channels for securities-related disclosures, restricting posting of these disclosures to approved social media executives, and requiring prepublication review of social media posts that include material claims about securities.

Q: Why Do Companies Need to Archive Executive Social Media Posts?

Companies should archive both their approved and deleted social media posts. When dealing with insider-trading allegations, archiving will allow companies to evaluate and use the social media evidence as necessary. When dealing with Regulation FD allegations, archiving will allow companies to evaluate the timing of their responses.

For example, the SEC charged one company’s CEO for allegedly making misleading and fraudulent claims through X and LinkedIn. The issuer’s public-relations firm allegedly posted claims that the company’s new device was “near the end of the test cycle” in Truth Social and X posts. However, the SEC alleged that the device “had yet to begin clinical testing,” and the CEO and the issuer’s public-relations firm both knew that this statement was false. The SEC then filed a complaint against the CEO and the issuer’s public-relations firm for allegedly engaging in a fraud and market manipulation scheme.

Why Does the SEC Prioritize Enforcement Against “Influencers” and Other Prominent Investors?

The SEC has recently issued press releases emphasizing that it will pursue insider-trading enforcement action against influencers. “It will not let ‘influencers’ get away with breaking the law to manipulate stocks, making false claims, and deceiving retail investors.” This suggests that in certain cases, the SEC will prioritize enforcement action against prominent investors.

If you have questions about social media-related insider trading, securities fraud, or market manipulation, our federal insider-trading defense lawyers are here to help. We offer free and confidential initial consultations, so you can get the answers you need without any delay.

Speak With a Federal Defense Lawyer

If you are dealing with any part of what this article describes, the next step is a conversation with a lawyer who handles these cases. Spodek Law Group is a second generation criminal defense firm practicing since 1976, representing clients nationwide from offices in New York, Brooklyn, Queens and Los Angeles. Call 212-300-5196 to speak with our team.