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Insider Trading Cases to Watch in 2023

Insider trading remains among the top enforcement priorities for both the U.S. Securities and Exchange Commission (SEC) and Department of Justice (DOJ). Major insider trading prosecutions often grab headlines and send shudders down Wall Street. After a relatively slow 2022, regulators are poised to reaccelerate insider trading actions against individuals and companies in 2023.

This post will highlight emerging insider trading trends to monitor and preview some of the most notable cases and investigations likely to develop this year. Public companies and investment firms need to stay abreast of the latest enforcement patterns to fortify compliance and controls.

Insider Trading in 2022 – Steady Activity

While the SEC filed only about 40% as many insider trading actions in 2022 versus record-setting 2021, enforcement remained consistent and aggressive with an array of major cases:

• - IPO Crackdown: Several cases targeted illicit trading around IPOs, including charges against investment banker Sebastian Pinto-Thomaz for leaking IPO details.
• - Crypto Schemes: The SEC brought its first insider trading cases involving cryptocurrency assets and NFTs as it expands its policing into digital assets.
• - Options Cases: Crackdowns continued on illegal options trading with cases against figures like ex-NFL linebacker Bill Romanowski.
• - International Focus: Overseas traders were targeted for trading U.S. stocks using hacked inside information.
• - Tipper Rings: Rings of tippers and tippees spanning business and personal relationships continued to be prosecuted.

While overall numbers dropped from unprecedented highs, insider trading remained an SEC priority with significant actions and penalties.

2023 Insider Trading Predictions

Major insider trading developments to watch for in 2023 include:

• - Renewed Uptick in Cases: With new units like the Crypto Assets and Cyber Team now established, we expect the number of insider trading cases to rise significantly again.
• - More Crypto Cases: Insider schemes related to cryptocurrencies, stablecoins, and NFTs will proliferate as the SEC doubles down on crypto regulation.
• - AI-Detection Focus: The SEC’s Market Abuse Unit will ramp up AI-driven detection programs to uncover novel insider trading patterns like options orders and social media tipping. Heightened surveillance is coming.
• - Harsher Sentencing Pursued: Prosecutors will advocate stiff prison terms for convicted insider traders to deter Wall Street misconduct. Multi-decade sentences may be on the table after leniency in 2022.
• - Executive Investigations: The SEC will train sights on C-suite officers to hold top corporate leaders accountable for lax controls enabling illicit trading.

Public company executives, financial professionals, and deal advisors engaging with market-moving confidential information should refresh their understanding of insider trading laws and company safeguards in light of likely upticks in SEC attention.

Major Cases to Watch

Notable insider trading investigations and cases facing developments in 2023 include:

• - SEC v. Matthew Panuwat: After Panuwat was sentenced to 4 years in prison in November 2022 for a $5 million options insider trading scheme, the SEC will likely pursue monetary penalties and officer/director bars in its civil case this year.
• - U.S. v. Rajat Gupta: Former Goldman Sachs board member Rajat Gupta’s criminal insider trading conviction is under appeal in the Second Circuit in 2023, carrying implications for the “personal benefit” standard in tipper-tippee cases.
• - SEC v. Peter Nolan: The SEC filed suit in 2022 accusing biotech VC investor Peter Nolan of insider trading on FDA drug approval tips. The high-profile Silicon Valley case could establish standards around insider trading related to clinical trial data leaks.
• - U.S. v. Telemaque Lavidas: Following Lavidas’ guilty plea, his former Pharma board member father faces criminal charges this year related to allegedly tipping his son about drug trial results. Secondary tipper liability will be examined.
• - U.S. v. Riley Roberts: Roberts, the fiancé of tennis star Sloane Stephens, faces an April criminal trial for allegedly trading on tips she provided from her seat on the board of cancer detection startup Grail. The celebrity case will test remote tippee standards.

These and other developing insider trading investigations will shape enforcement trends and could produce meaningful case law precedents in 2023. Public companies, investors, and advisors in the crosshairs should retain top securities counsel for guidance navigating insider trading rules and defending allegations. The SEC and DOJ show no signs of letting up in their pursuit of insider trading violations.

Conclusion

Despite a brief lull in cases and headlines, insider trading enforcement remains a regulatory priority. The SEC and DOJ have the resources and technological capabilities to relentlessly monitor markets for trading anomalies and suspicious patterns. With insider trading schemes growing more sophisticated, regulators aim to keep pace. Public companies and market participants should ensure diligent policies and procedures are in place to prevent unlawful information leakage and trading activity that could prompt harsh civil penalties and criminal prosecution. Proactive compliance will prove critical in 2023 as insider trading prosecutions resurge.