Recent news of Elon Musk, CEO of Tesla and SpaceX, being investigate for Insider Buying has everyone looking for how this could happen and who in the past has been prosecuted for insider trading. It’s usually hedge fund owners that get in trouble for insider trading but there have been others including Martha Stewart, George Soros, and Marylin Star. When someone purchases stock on insider knowledge not available to the public, they can be prosecuted.
On August 7th of last month, Tesla CEO Elon Musk tweeted that he had secured funding to take the company private from Saudi sources at the price of $420/share. This public announcement caused the price of the stock to climb dramatically (8 percent) before being halted. The problem is that Musk had never made a public announcement about the company in this fashion before. And he could be in trouble if the price per share is inaccurate or all the funding is not actually secured. Look for private investors to sue Musk for his announcement if they feel they lost money because of the public announcement on Twitter.
Martha Stewart got in trouble in 2004 for insider trading of ImClone stock and had to serve 5 months in prison with an additional 2 years of supervised time including some home confinement. Stewart sold ImClone stock two days prior to the stock falling 16% after an FDA decision on the biotech’s most important drug. She avoided $45,000 in loses by selling when she did. It was discovered that she acting on advise from a financial advisor who had knowledge of ImClone CEO Sam Waksal selling $5 million of the stock. The reason he was selling was unknow at the time. Because she did not know the reason for the trade and did not have company information at her disposal, she was not charged with insider trading. But she obstructed justice during the investigation and was sentence for that crime.
Resistance fighter George Soros was found to have been involved in insider trading in France in 2001 and was fined the amount that he profited, $2.3 million. Best known as a currency trader, Soros purchased company shares in France of soon to be government run organizations before they were purchased. But he had knowledge of the transactions as he was consulted as a possible financial source. He denied any wrong-doing but was found guilty.
Porn actress Marylin Star and a friend of hers (Anthony Pomponio) made over $170,000 trading on inside information about six different corporate mergers given to Star from an investment banker who she was dating. James McDermott, chief at Keefe, Bruyette & Woods stole insider information and relayed that information to the pair who then made profitable trades. The two had never traded stocks prior to meeting McDemott and both invested in the same small regional banks that were about to be involved in mergers.
Top Tesla short-seller Chanos responds to Musk's inside trading accusation