New York City Insider Trading Defense Lawyer

Insider trading is prosecuted more aggressively in New York City than anywhere else in the country, because the Southern District of New York and the SEC treat Wall Street as their home turf, and a conviction can bring up to 20 years in federal prison, millions in fines and disgorgement, and a lifetime bar from the securities industry. Insider trading is not its own statute. It is a form of securities fraud, built on trading while in possession of material nonpublic information in breach of a duty, and it almost always comes with a parallel SEC civil case running alongside the criminal one. Because these cases turn on complex questions of duty, materiality, knowledge, and personal benefit, they are frequently defensible, but only with the right lawyer and an early start. If you are under investigation or charged in New York City, an experienced insider trading defense attorney should be your first call.

Varghese & Associates, P.C. is a federal criminal defense firm on Wall Street, in the heart of the Southern District of New York, the epicenter of insider trading enforcement. Insider trading defense is a core part of our NYC federal criminal defense practice, and the firm is led by Vinoo Varghese, a former prosecutor and one of the most recognized criminal defense attorneys in the country, whose trial practice has included insider trading defense. Our insider trading defense attorneys handle these cases in house, from the first SEC subpoena through investigation, indictment, trial, sentencing, and appeal. Matters are not routed out to other firms.

Call now for a confidential consultation with a New York City insider trading lawyer. The earlier our insider trading defense lawyers are involved, the more they can do.

What Is Insider Trading?

Insider trading is the crime of buying or selling a security while in possession of material nonpublic information about that security, in breach of a duty of trust or confidence, or passing that information to someone who trades on it. There is no statute titled "insider trading." It is prosecuted as securities fraud under Section 10(b) of the Securities Exchange Act and SEC Rule 10b-5, and often under the securities and wire fraud statutes as well. The core idea is that trading on an unfair informational advantage obtained through a breach of duty defrauds the market and the source of the information. Because the crime is defined by court decisions rather than a simple statute, the law is technical and full of defenses, which is exactly why these cases must be handled by a lawyer who understands the doctrine.

What Are the Insider Trading Statutes and Rules?

Insider trading is charged under the federal securities fraud framework, and prosecutors and the SEC often use several provisions at once. The laws most often in play include:

• Securities fraud under the Securities Exchange Act, Section 10(b), and SEC Rule 10b-5 (15 U.S.C. § 78j(b); 17 C.F.R. § 240.10b-5)
• Willful violations of the Securities Exchange Act (15 U.S.C. § 78ff)
• Securities and commodities fraud (18 U.S.C. § 1348)
• Wire fraud, frequently charged alongside the securities counts (18 U.S.C. § 1343)
• Conspiracy (18 U.S.C. § 371)
• Civil enforcement, disgorgement, and penalties sought by the SEC in a parallel action

What Are the Two Theories of Insider Trading?

Insider trading is prosecuted under two theories: the classical theory, where a corporate insider trades in their own company's stock on material nonpublic information in breach of a duty to shareholders, and the misappropriation theory, where a person trades on confidential information in breach of a duty owed to the source of that information. The misappropriation theory, confirmed by the Supreme Court, greatly expanded who can be charged, reaching lawyers, consultants, printers, and others who misuse confidential information they were entrusted with, even if they owe no duty to the company whose stock they trade. Understanding which theory the government is using is essential, because the duty the government must prove, and the defenses available, differ between them.

What Is Tipper and Tippee Liability?

Tipper-tippee liability allows the government to charge both the person who discloses inside information (the tipper) and the person who trades on it (the tippee), but only where the tipper disclosed the information in breach of a duty and in exchange for a personal benefit, and the tippee knew or should have known of that breach. The personal-benefit requirement, established by the Supreme Court and refined in later cases, is one of the most important and most litigated issues in insider trading law. Where the government cannot prove that the tipper received a real personal benefit, or that a remote tippee knew the information came from a breach, the case can fail. Our insider trading defense attorneys focus hard on the personal-benefit and knowledge elements, which are frequently the weakest part of the government's case.

What Is Material Nonpublic Information?

Material nonpublic information, often called MNPI, is information that a reasonable investor would consider important in deciding whether to buy or sell a security and that has not been released to the public. Both parts matter. Information that is immaterial, such as a minor development, or that was already public, cannot support an insider trading charge. Whether a piece of information was truly material, and whether it had already reached the market, are often genuine factual disputes. Challenging the government's claim that the information was both material and nonpublic is a central line of defense in many insider trading cases.

Who Gets Charged With Insider Trading?

Insider trading charges reach corporate executives and employees, board members, lawyers, accountants, consultants, investment bankers, hedge fund managers and analysts, expert-network consultants, and the friends and family members who receive and trade on tips. Enforcement has expanded well beyond classic corporate insiders to reach the entire information chain, including remote tippees several steps removed from the source. A person can be pulled into an investigation simply because their trading was well timed, or because they appear in the phone or message records of someone else under investigation. Because so many people can be swept in, and because the government builds these cases from trading data and communications, early and independent defense is critical.

Why Is the SEC Almost Always Involved?

Insider trading is enforced by both the Department of Justice, which brings criminal charges, and the SEC, which brings a parallel civil enforcement action, and the two frequently run at the same time, sharing information and coordinating. The SEC often moves first, issuing subpoenas and taking testimony, and what a person says to the SEC can be handed to criminal prosecutors. A Wells notice from the SEC signals that civil charges are coming and often that a criminal referral is possible. Coordinating the defense across the criminal and civil tracks, and protecting your Fifth Amendment rights while the SEC seeks your testimony, is one of the most important and most technical parts of insider trading defense, and it is a core focus of our firm.

What Are the Penalties for Insider Trading?

Criminal insider trading carries up to 20 years in prison per count under the securities fraud statutes, along with fines of up to $5 million for an individual, while the SEC can separately seek disgorgement of profits, civil penalties of up to three times the gain, and a bar from the securities industry. The combination of prison, criminal fines, disgorgement, and civil penalties means the total exposure can far exceed any trading profit. A conviction also ends most careers in finance. Because the gain or loss from the trades drives the criminal sentence and the civil penalties, contesting how the government calculates that figure is one of the most valuable fights in an insider trading case.

How Does Sentencing Work in an Insider Trading Case?

Federal insider trading sentences are calculated under the United States Sentencing Guidelines, where the single biggest driver is the gain resulting from the offense, along with the sophistication of the conduct and the defendant's role. Because the gain figure controls so much of the range, one of the most important battles is over how that gain is calculated and attributed, especially in tipper-tippee chains where the government tries to attribute the trading of others. Our insider trading defense attorneys contest the gain calculation, challenge role and sophistication enhancements, present detailed mitigation, and argue for a sentence below the guideline range, which in these cases can mean the difference between prison and a non-custodial sentence.

What Are the Defenses to Insider Trading?

Insider trading cases turn on duty, materiality, knowledge, and personal benefit, and that is where the defenses concentrate. Every case is different, but the strategies our insider trading defense lawyers commonly use include:

• No material nonpublic information. Showing the information was public, immaterial, or not the basis for the trade.
• No breach of duty. Arguing that no duty of trust or confidence was breached, which is required under both theories.
• No personal benefit. In tipper-tippee cases, defeating the requirement that the tipper received a personal benefit for the disclosure.
• No knowledge of a breach. Showing a tippee did not know, and had no reason to know, that the information came from a breach of duty.
• Lack of intent. Challenging whether the defendant acted willfully rather than on independent research or a lawful basis.
• The 10b5-1 plan defense. Establishing that trades were made under a pre-existing written trading plan adopted in good faith before learning any inside information.

What Should You Do If You Receive an SEC Subpoena or Are Under Investigation?

If you receive an SEC subpoena, a Wells notice, or a request to testify, or learn you are under investigation for insider trading, do not testify or produce documents without counsel, do not talk to federal agents, and do not alter, delete, or discuss anything about your trades or communications. Call an insider trading defense attorney immediately. Statements and testimony given to the SEC can be used in a parallel criminal case, and deleting messages or records after you know of an investigation can create a separate obstruction charge. You have the right to remain silent and the right to counsel. Preserve everything, say nothing without counsel, and let your lawyer manage both the SEC and any criminal exposure.

How Our Insider Trading Defense Attorneys Can Help You

Our insider trading defense lawyers defend these cases at every stage, and they look for the earliest possible point at which the case can be won or reduced:

• Early intervention. Responding to SEC subpoenas and Wells notices, grand jury subpoenas, and target letters, and negotiating with the U.S. Attorney's Office to seek a declination before an indictment.
• Parallel-proceedings strategy. Coordinating the defense across the criminal case and the SEC civil action while protecting your Fifth Amendment rights.
• Attacking the elements. Building the case that there was no material nonpublic information, no breach of duty, no personal benefit, or no knowledge.
• Financial and communications analysis. Testing the government's trading, timing, and communications evidence and its gain calculations.
• Trial. Trying cases before federal judges and juries in the Southern District, the Eastern District, and other districts as engaged.
• Sentencing and appeal. Challenging the gain figure and enhancements, defending against disgorgement, and pursuing appeals and post-conviction relief.

Is Insider Trading a Felony?

Yes. Criminal insider trading is a felony, charged as securities fraud and punishable by up to 20 years in prison per count, along with heavy fines, disgorgement, and a securities-industry bar. There is no misdemeanor version of criminal insider trading. Even a first offense is a serious felony that can end a career in finance and carry substantial prison time, which is why every insider trading allegation, and every SEC inquiry that could become criminal, should be treated as serious from the start.

Can an Insider Trading Charge Be Dismissed or Reduced?

Yes. An insider trading charge can be dismissed or reduced through a motion to dismiss where the government cannot establish the required duty, materiality, or personal benefit, a successful suppression motion, or negotiation that resolves the matter civilly with the SEC and avoids or limits criminal charges. Because insider trading law is so demanding, and because the personal-benefit and knowledge elements are so often contested, these cases can be more vulnerable than they appear. Dismissals and favorable resolutions are never guaranteed, but they are far more likely when an insider trading defense attorney is involved early and attacks the government's theory before it hardens.

How Much Does It Cost to Hire an Insider Trading Lawyer in New York City?

The cost of an insider trading lawyer in New York City depends on the complexity of the trades and communications, whether the SEC is running a parallel case, the number of people involved, and whether the matter resolves before or goes to trial. These cases involve extensive analysis of trading and communications data, expert work, and coordination across the criminal and civil tracks, so they require real work. Our insider trading attorneys are transparent about fees from the first conversation and structure the representation to fit the matter. Given the decades of exposure, the financial penalties, and the industry bar at stake, the more important question is usually what an inadequate defense can cost you.

An Insider Trading Defense Attorney the National Media Turns To

When the biggest federal financial cases in the country are in the news, networks and newspapers call Vinoo Varghese to explain what is really happening in the courtroom. That is the same judgment and credibility our insider trading defense attorneys bring to your case.

Vinoo Varghese has provided legal analysis and commentary for CBS News, Fox News, Fox Business, CNN, MSNBC, Court TV, HLN, BBC, Inside Edition, i24 News, Sky News Arabia, and Nancy Grace's Crime Stories, and has hosted true-crime legal analysis for Vanity Fair. He has been quoted as a legal authority by The New York Times, The Wall Street Journal, the New York Law Journal, Law360, the New York Daily News, and the New York Post. A former prosecutor from the Brooklyn District Attorney's Office, he is a nine-time National Trial Lawyers Top 100 honoree, an eight-time New York Metro Super Lawyer, rated AV Preeminent by Martindale-Hubbell, and has served on the visiting faculty of Harvard Law School's Trial Advocacy Workshop.

Contact a New York City Insider Trading Defense Lawyer Now

If you are under investigation by the SEC or the Department of Justice, have received a subpoena or Wells notice, or have been charged with insider trading anywhere in New York City, do not wait and do not talk to anyone but your lawyer. Insider trading is a form of securities fraud, and you can read more about the broader offense on our securities fraud defense page. An insider trading defense attorney who has stood in the courtroom and tried the cases can change what happens next.

Call Varghese & Associates, P.C. for a confidential consultation. Our office is located at 2 Wall Street, Suite 310, New York, NY 10005, steps from the federal courthouses of the Southern District of New York.