In 2008, the Troubled Asset Relief Program allowed the U.S. Treasury to send $250 billion to banks that bought and insured bad assets and equity. A recent study conducted by the University of Cambridge and Stanford found that these same banks benefited from insider knowledge during the Great Recession – while taking a government bailout to stay afloat.
Specifically, the new study indicates that political connections played a role in how the funds were used. Political insiders in the banks had private access to government intervention before it occurred, allowing them to trade and profit from that information.
In the nine months following the activation of TARP, insiders’ investments appeared to be doing better than the norm. However, before TARP was activated, no difference existed between the profits of insiders and those who didn’t have access to insider information.
Another study by Harvard Business School indicates that certain investors with inside information tend to trade more shares ahead of liquidations, which creates an unfair advantage for other investors on the open market.
Insider trading is still rampant on Wall Street.
What exactly is insider trading?
Below, we’re going to break the crime down so that you understand what can get you charged with and how you can avoid running afoul of the law.
What Insider Trading Looks Like
One of the first things you need to know is that insider trading is actually a form of securities fraud. This criminal wrongdoing occurs when an individual creates a misleading statement about a stock or security, then others use the false information to make a financial decision.
The false information can temporarily and falsely raise the company’s stock value, which encourages investments – even if a company is about to go bankrupt.
The Enron scheme is a well-known example of this type of fraud. Profits were inflated above real value, and investors ended up losing everything.
Insider trading is when an individual uses secret information about a company’s financial information to make a financial decision before the information is publicly released. This gives that individual an unfair advantage over clients in the open market. It is a type of fraud often occurs on the executive level, where company employees have deep access to information about the company’s financial holdings.
Information about insider trading can be shared with others, who may also be charged with the crime. Third parties are often convicted on securities fraud if they are involved in insider trading.
An example is a dishonest investor buying many shares of a small company’s inexpensive stock. The investor then encourages other investors to buy the stock, which raises the price. Then the dishonest broker immediately sells all the shares for a profit.
If You Are Facing Insider Trading Allegations
A conviction for securities fraud can land you in federal prison for decades, and you may be forced to pay significant fines. You need a strong advocate who will look for every possible way to get your charges reduced or dropped.
That’s why, if you are under investigation for insider trading, it is imperative that you contact an experienced Texas white collar criminal defense lawyer to protect your rights.
A criminal defense attorney with a successful track record handling these types of cases will be able to craft the strongest possible defense against your charges. He or she can help you aggressively stand up to federal investigators and fight for your rights.
Call today for your free case review.