Is This Insider Trading?

[Todd Terry]

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I think Todd Terry is the expert, but let me point out that you might not even face real prosecution on #1, because the govt would loath losing a case like that and have a judge set a precedent. But they might threaten you and try to get you to plea bargain. That makes a public example for other would be copycats. Not sure a good criminal defense lawyer would recommend you plea though, he might laugh at the govt case and itch to set a precedent against their over-reaching.

[/ QUOTE ]

This is a good point in general. The Government often prefers to let the law remain murky rather than risking the setting of a precedent against them. Martha Stewart is a good example of this -- they had IMO a perfectly winnable case of insider trading against her and Baconovic, but chose not to pursue it. That being said, I'm fairly sure they would go after the person in Number 1, at least civilly. If they brought a criminal case, I would recommend fighting it all the way to the Supreme Court if necessary.