DEX in the City: Insider Trading and Crypto: What the Law Actually Says - Ep. 962
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Hey all, before we begin, I've got some exciting news to share. We've been working on something a little wild behind the scenes. It's called Unshade On Air, a revamped livestream series and podcast feed that takes you way beyond the headlines. It features sharp, maybe even controversial, takes on major events and the kind of on chain intel that never makes it to your feed. Way more shows, way more often, each one laser focused on a different slice of crypto and finance. First up is Dex in the City, where the wallets are cold and the takes are hot with Jesse Brooks, Catherine Kirkpatrick Boz, a
A lot of this case law has contradicted itself over the years, which creates real confusion even amongst lawyers who are practicing in this space. So, like, it's certainly not clear cut. Another parallel to crypto is, like, there's not necessarily, like, crystal clear lines of what is insider trading, which has made it very important to assess, like, the different precedent that exists. But people do go to jail for this. Hi, all, and welcome to Dex in the City. We are so happy to be here. And this is where the wallets are cold and the takes are hot. First, have Jesse, Web three prosecutor turn
Sure. Thanks, KK. So insider trading is I think it's one of those things that, like, everyone thinks that they understand. But, actually, the legal definition can be both narrower and broader and in some cases, like, not as intuitive as you would think. Right? So at its core, insider trading is trading in securities while in possession of something called material nonpublic information or an MMPI. And all that means is information that an ordinary investor wouldn't know, but that would matter to them if they did know.
Yeah. Yeah. So it's
it's a I know. It gets a I mean, essentially, that is what it is. It gets a little bit more complicated because the law around this has evolved over the years to sort of, like, capture different kinds of fact patterns. But at its core, it's about basically, like, you know, not allowing some people to have better timing and an unfair advantage. Right? So insider trading laws are basically about a way to level the playing field when it comes to, like, public company stocks. So one way to think about it is US markets depend on the idea of fairness. Right? We talked about this, I think, like, in o
And it gets really messy, Vee. Like, explain the bounds of this are super flex. Because the classic example is you're in an elevator, and you hear two guys whispering. What do you do with that information? Can you trade on it? Or you're a masseuse, and you overhear a call. Like, that's where it gets really fuzzy.
Yeah. So I would say in general, even if you don't work at the company, you still have to have some duty not to use that information. Right? So here, if you're a lawyer working on the merger, right? Or if you're a friend who got tipped from the lawyer, both of those people have a duty, like in general, I think it's a little bit more nuanced, but in general, both the tipper and the tip bee in that case could be charged with insider trading because they obtained that information through a relationship of trust and through a duty that they had to the company whose stock they traded. In the exampl
And that's where it gets real sticky with crypto. And the other thing I'll just note before we hear from Jesse is that a lot of this case law has contradicted itself over the years, which creates real confusion even amongst lawyers who are practicing in this space. So, like, it's certainly not clear cut. Another parallel to crypto is, like, t
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