Insider trading is a criminal act when a person with a fiduciary duty executes trades on the basis of material, non-public information. Typically, those involved in insider trading face either civil penalties from the Securities and Exchange Commission or criminal prosecution by the Justice Department.

 

In the first ever cryptocurrency insider trading tipping scheme, US securities authorities recently charged a former product manager at Coinbase Global and two tippees for sharing confidential information about which cryptocurrencies would be listed on the exchange.

Insider trading in the cryptomarkets

 

Insider trading is a type of market manipulation that involves the use of confidential information to buy or sell securities or commodities at a price higher than the true market value. This type of activity may be considered illegal and it can be a risk to both companies and investors.

 

During the cryptomarket boom, many people have made significant amounts of money by buying and selling cryptocurrencies at inflated prices. However, this behavior can be a risk to crypto investors, and it could cause them to lose their money.

 

The cryptocurrency market has recently been hit by insider trading allegations. Allegations that employees of Coinbase, a popular cryptocurrency exchange, bought Bitcoin Cash (BCH) in advance of its listing on the platform have caused an outcry. These actions have also prompted an investigation by the US Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC).

 

This insider trading occurred in late November and early December. A study by researchers at the University of California, Berkeley, found that employees at Coinbase traded on inside information about the BCH listing in contravention of the exchange’s insider trading policy. The study found that the insiders made at least $1.5 million in illegal profits.

 

These results suggest that the crypto markets may soon be subject to insider trading regulation, similar to that applied to stocks and other commodities. This is particularly true given that a number of crypto coins are now considered commodities under the Dodd-Frank Act.

 

One possible solution is for federal regulators to take advantage of a little-used insider trading regulation that bars trades on nonpublic information secured through deception or fraud, or in violation of a duty to keep the information confidential. Such a rule would be a useful tool for crypto exchanges and investors alike, as it could help to protect against the kind of market manipulation that has occurred in traditional markets.

 

The SEC and CFTC have both brought a small number of insider trading cases regarding commodities. However, these cases have usually been against traders who stole information from their employers.

Insider trading in the traditional markets

 

Insider trading occurs when a person acquires, or has obtained, material non-public information about a company and uses that information to make a trade. These types of transactions can be illegal, and the consequences include fines, jail time, or both.

 

There are several ways to curb insider trading, including tighter rules governing economic reports and market-moving data. For example, in the U.S., policymakers have halted the practice of dozens of public officials getting market-moving economic data 24 hours before it's publicly released, which may have prevented some insider trading.

 

However, insider trading isn't necessarily a "victimless crime." The people who profit from it do so at the expense of others. This is because the information they use to make a trade can impact the price of the stock, which means they have an unfair advantage over other investors.

 

This is why regulators have fought hard to prevent people from taking advantage of this situation. The SEC has a rule that requires people who own 10% or more of a company's shares to report their trades on a form called Form 4. They must also disgorge any profits they made on those transactions.

 

These trades must be reported within two business days of the date of the transaction. This rule has been around for years, and it's a good way to ensure that traders don't take advantage of any potential loopholes in the law.

 

The SEC also has a rule that prohibits people from using their own money to make insider trades. This rule is particularly important when someone is a member of the board of directors of a company, because they have access to company secrets that could cause them to lose their jobs.

 

There are several things that can make an insider trade illegal, and it's best to consult with a financial expert before making a trade in the market. The most common way to prevent insider trading is to follow a rule that requires a third-party to buy and sell stocks on behalf of an investor.

 

Insider trading can be a serious problem in the traditional markets, and it can impact the entire economy. For instance, if a person's trading activity can be tied to the release of a significant piece of economic news, it could lead to a big drop in the value of the stock. If this happens, the investors who were affected by this change will be forced to sell their stock and lose money. This can be an extremely dangerous situation.

Insider trading in the cryptocurrency markets

 

In the recent past, there has been a rise in insider trading in the cryptocurrency markets. Generally, insider trading is considered illegal in most jurisdictions and can be punishable with large fines and imprisonment.

 

Often, people buy cryptocurrencies or non-fungible tokens (NFTs) before they are listed on major crypto exchanges, which can cause their prices to skyrocket. This type of insider trading is also considered a form of price manipulation.

 

Researchers from the University of Technology in Sydney, Australia, recently published a study that suggests this kind of insider trading is systemic in the cryptocurrency market. They used granular blockchain trading records to identify wallets that consistently took positions in cryptocurrencies hours before official listing announcements.

 

The researchers found that these traders earned profits of $1.5 million. They also discovered that the identified wallets were connected to one another, indicating that they all had access to confidential information about which cryptocurrencies would be listed on Coinbase.

 

This sort of insider trading may not seem like a big deal, but it can have a serious impact on the overall health of the cryptocurrency market. It can create an uneven playing field and lead to less investor trust. Cryptoinsiders

 

In addition, it could impede the adoption of cryptographically secure ways to represent securities and other financial instruments. The researchers believe this is because insider trading can distort prices and create an unfair competitive advantage for those who have access to confidential information.

 

As with traditional markets, the SEC has ruled that people cannot trade on material non-public information while they are employed by a company. This policy is meant to prevent employees from taking advantage of their position and gaining a competitive edge through insider knowledge.

 

It also prohibits them from disclosing this information to friends or family members. This is an important part of the regulation, as it helps ensure that insiders don't have their information available to others.

 

Despite this, insider trading in the cryptocurrency markets is still a concern for regulators. As such, they are investigating how crypto exchanges handle the confidential information of their employees.