Chicago Physician Accused of Insider Trading

Everyone has heard of insider trading, but what is it really? Essentially, as an “insider,” you are not allowed to make beneficial trades unfairly. To prove insider trading, the federal government must show that the information was embargoed or confidential prior to the execution of the trade.

In this case, a Chicago physician is being accused of purchasing shares of a California-based biotech company that recently announced positive results of a new cancer treatment. The physician is accused of making the trade before the company announced the results publicly. Hence, insider trading. 

According to federal prosecutors, the defendant used his position to acquire confidential information that was embargoed for public disclosure. He then used that information to make a trade prior to the announcement of a major success and is now accused of insider trading. Federal prosecutors accuse the doctor of making $134,000 off the illegal trade, purchasing over 8,000 shares and then selling them shortly after the announcement. 

The doctor is charged with one count of securities fraud. A conviction could land him in prison for the next 20 years. In this article, we will discuss defense strategies to charges of insider trading. 

Three Defenses for Insider Trading Charges

Along with the more standard defenses of “I didn’t do it” and “what are you talking about,” there are three other tried and true defenses to insider trading. Those are:

  • The information was irrelevant – Let’s say you find out some key information on a company, place a trade, win big, but the information you based the decision to purchase on was not relevant to the reason why the stock increased in value. In that case, you have not broken the law as the law requires that the information be used illegally for profit.
  • Advice of counsel defense – Made famous in Goliath with Billy Bob Thornton, the advice of counsel defense means you relied on professional advice to execute a trade. The law requires that you knowingly break the law. Even if you do not know what the law is, you still have to know that you are using information not publicly available to benefit yourself. If your lawyer tells you to do something, the prosecution cannot establish the elements of fraud.
  • Mosaic theory – This one is my favorite. The prosecution must prove that you are an insider who came by the information directly. What happens when, as an affiliated outsider, you read the room, use bits and pieces of publicly-available information, put two and two together, and use your own wits to deduce the matter on your own? Well, according to federal law, you are innocent. Mosaic theory is very difficult to disprove.

Talk to a Chicago Criminal Defense Attorney Today

If you are facing charges of insider trading or any white-collar crime, call David Freidberg today at (312) 560-7100 and we can begin preparing your defense immediately. Such charges are usually filed by the federal government, so you will need an attorney familiar with defending clients in federal court to resolve the matter. Call a Chicago criminal defense attorney today.

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