Trading of securities by company executives based on inside information has been illegal throughout much of the history of corporate America, but enforcement has evolved over time.

Over the years, the Securities and Exchange Commission, the United States attorney for the Southern District of New York and the Manhattan district attorney have pushed to investigate and prosecute those accused of insider trading. Below are some of the key cases.


  1. 1909
    Supreme Court Establishes Insider Rule

    The Supreme Court established a rule that the director of a company must either disclose the inside information or abstain from trading. Although the case, Strong v. Repide, made it clear that an executive could not use privileged information for profit, it did not address the issue of who was an insider.

  2. Photo
    A 1942, The New York Times reported on the Securities Exchange Commission’s adoption of Rule 10b-5. Credit The New York Times
    1934
    Congress Passes the Securities Exchange Act

    The law contains a key provision, Section 10, broadly outlawing certain forms of stock fraud. Based on Section 10, the Securities and Exchange Commission in 1942 adopted Rule 10b-5, making the fraud provisions applicable to purchases as well as sales of securities. Section 10 and Rule 10b-5 became the key provisions to prosecute illegal insider trading. Neither provision actually defines insider trading.

  3. ​1968
    Texas Gulf Case Sets Insider Precedent

    Acting on a tip that the Texas Gulf Sulphur Company had discovered a site near Timmins, Ontario, rich with copper ore, company officials traded heavily in the stock before disclosing the find.

    The officials were sued by the Securities and Exchange Commission and by shareholders, who contended that the executives had traded on inside information. The United States Court of Appeals for the Second Circuit in New York ruled that anyone who possessed inside information of a consequential nature must either disclose it to all of the investing public or abstain from trading until that information was public.

  4. ​1980
    Supreme Court Reverses Insider Conviction

    In 1978, the S.E.C. said Vincent F. Chiarella, a printer at Pandick Press, had pieced together the names of corporate targets from confidential documents and then traded on that information. A federal court convicted Mr. Chiarella of 17 counts of securities fraud and sentenced him to one year in prison.

    The Supreme Court said there must be a confidential relationship, or fiduciary duty, between any defendant and someone else for there to be a violation of the securities law.

  5. ​1983
    Supreme Court Backs Analyst Who Warned of Fraud

    The Supreme Court rules that Raymond Dirks, a financial analyst, did not commit illegal insider trading by telling clients to sell their stock in Equity Funding.

    Mr. Dirks had uncovered a huge fraud in 1973. Rather than make his discovery public, he told clients to get rid of their stock in the company.

    The court said the duty of a person who receives an inside tip, known in securities jargon as a tippee, depended entirely on whether the source of the tip had breached a legal duty to the corporation’s shareholders in passing the information along.

  6. Photo
    The magnitude of the penalty imposed against Ivan Boesky stunned Wall Street. Credit Marilynn K. Yee/The New York Times
    1986
    Boesky Pays $100 Million Fine

    Ivan F. Boesky, the former stock speculator, agreed to settle insider trading charges and provide evidence about other wrongdoing on Wall Street. He was known as a loner, a man called “Ivan the Terrible” for his apparent success in trading stocks.

    Mr. Boesky was a specialist in risk arbitrage, where stocks are bought in anticipation of a takeover, a merger or change in corporate ownership. His case is said to have influenced Oliver Stone’s movie “Wall Street.”

  7. 1987
    Wall Street Journal Reporter’s Conviction Is Upheld

    The Supreme Court upheld, 8 to 0, the conviction of R. Foster Winans on federal fraud charges for using advance knowledge of articles about publicly traded stocks to make illegal profits.

  8. Photo
    Michael Milken at Drexel in 1978. Government lawyers have said the investment firm traded on insider information from 1984 to 1986. Credit Neal Boenzi/The New York Times
    1988
    Drexel, a Wall St. Powerhouse, Pays $650 Million Fine

    In the largest settlement ever of federal securities law violations, Drexel Burnham Lambert pleaded guilty to six felony counts. The deal ended an investigation lasting more than two years into Drexel’s relationship with Mr. Boesky.

    The agreement was reached after a showdown between the firm’s chief executive and the United States attorney, Rudolph W. Giuliani, who gave the investment house until 4 p.m. to settle or be indicted.

  9. August 1989
    6 Convicted of Racketeering in Stock Conspiracy

    The five principals of a defunct New Jersey investment partnership and a former trader with Drexel Burnham Lambert were found guilty of creating illegal tax losses through fraudulent stock deals.

    The defendants in the case, which focused on trading by the partnership, Princeton/Newport Partners, were the first to be charged with racketeering as part of the government’s investigation that began in 1986 into crime on Wall Street.

  10. August 1989
    Sandy Lewis Admits Rigging a Stock Price

    Salim B. Lewis, a leading Wall Street trader who was once a special adviser to the Securities and Exchange Commission, pleaded guilty to criminal charges that he helped manipulate a stock price in 1986, in an action that benefited the American Express Company.

    Mr. Lewis, known as Sandy, said only that he had acted after observing that a wave of short-selling was depressing the stock. President Bill Clinton pardoned him, and a federal court judge later said Mr. Lewis acted out of pure reforming impulse.

  11. April 1990
    Giuliani Called Too Zealous in Goldman Sachs Case

    There was a long-held suspicion of insider trading in nearly every major takeover in the 1980s. “It was like free sex,” said the head of one of Wall Street’s largest investment banks. “You definitely saw the abuses growing, but you also saw the absence of people getting caught.”

    Sweeping charges were leveled by the government and then dropped in 1987, five months after prosecutors arrested Robert A. Freeman of Goldman Sachs and two other traders, one being led from his office in handcuffs and another spending a night in jail before being charged.

    The former head of risk arbitrage at Goldman was sentenced to four months in prison and fined $1 million for a single incident of insider trading.

    Mr. Giuliani later said the case was perhaps the biggest mistake he had made as a prosecutor because the indictment had been brought too hastily.

  12. Photo
    Michael R. Milken with his wife, Lori. He was the most highly paid financier in history. Credit Neal Boenzi/The New York Times
    November 1990
    Milken, King of ‘Junk Bonds,’ Gets Prison and $600 Million Fine

    Michael R. Milken, who created the “junk bond” market that financed many big corporate takeovers in the 1980s, pleaded guilty to six criminal charges related to securities transactions. He did not plead guilty to any charges of racketeering or insider trading.

    Mr. Milken had long maintained his innocence, but he broke down in court and cried, saying he had “hurt those who are closest to me.”

    Mr. Milken, the former head of the junk bond department at the defunct Drexel, was sentenced to 10 years in prison, but Judge Kimba M. Wood reduced the sentence so that he served only two years.

  13. 1995
    17 Charged in AT&T Insider Trading

    In one of the largest cases of insider trading on record, the government charged that 17 people used confidential information about AT&T’s plans to acquire four companies from 1988 to 1993 to realize $2.6 million in illegal profits.

  14. Supreme Court Upholds S.E.C.’s Theory of Insider Trading

    In 1997, the Supreme Court ruled that insider trading laws applied to people who had confidential information even if they did not have any connection to the company whose shares were being traded.


  15. 2000
    Affair With Adult Film Star Leads to Insider Conviction

    James J. McDermott Jr., the former chairman and chief executive of the Manhattan investment bank Keefe, Bruyette & Woods, was convicted of stock fraud and conspiracy for leaking confidential financial information about a series of bank deals to an X-rated movie star.

    Mr. McDermott, the first Wall Street chief executive charged with insider trading, was not accused of making any illegal profits himself. In fact, all the profits involved were paltry, considering the riches he might have missed out on.

  16. Photo
    In remarks to her supporters after the hearing, Martha Stewart put in a promotion for her company. Credit Bebeto Matthews/Associated Press
    2004
    Martha Stewart Sentenced to Prison

    The home-decorating mogul received the minimum sentence – five months in prison, plus five months of home confinement – for lying to federal investigators about a stock sale that she called “a small personal matter.”

    Ms. Stewart’s troubles stemmed from her trade of ImClone shares just before bad news from that company was made public. Samuel D. Waksal, the founder of ImClone, was sentenced to a seven-year prison term after pleading guilty to orchestrating stock trades.

  17. 2006
    Enron Chiefs Guilty of Fraud

    Kenneth L. Lay and Jeffrey K. Skilling, the chief executives who guided Enron through its spectacular rise and even more stunning fall, were found guilty of fraud and conspiracy. They were among the most prominent corporate leaders convicted in the parade of scandals that represented the get-rich-quick excesses and management failures of the 1990s.

    Mr. Lay died six weeks after his conviction. Mr. Skilling was sentenced to 24 years in prison. His sentence was later reduced by 10 years.

  18. Photo
    Over a nine-month stretch in 2008, federal agents secretly recorded Raj Rajaratnam’s telephone conversations. Credit John Marshall Mantel for The New York Times
    2011
    11 Years in Prison for Billionaire Rajaratnam

    Raj Rajaratnam, the billionaire investor who once ran one of the world’s largest hedge funds, received the longest prison sentence ever for insider trading. Capping an aggressive government campaign that ensnared dozens, Preet Bharara’s prosecutors built the case against Mr. Rajaratnam, former head of the Galleon Group, with powerful wiretap evidence.

    “I heard yesterday from somebody who’s on the board of Goldman Sachs that they are going to lose $2 per share,” Mr. Rajaratnam said to one of his employees in advance of the bank’s earnings announcement.

  19. Photo
    Rajat Gupta, right, with his lawyer, Gary Naftalis. “This is a fall from grace of Greek tragedy proportions,” Mr. Naftalis said. Credit Spencer Platt/Getty Images
    2012
    Ex-Goldman Director Leaked Boardroom Secrets

    Rajat Gupta, who ran the consulting firm McKinsey & Company and served as a major adviser to the philanthropic efforts of Bill Gates and Bill Clinton, was sentenced to two years in prison for leaking boardroom secrets to Mr. Rajaratnam.

    “He is a good man,” Judge Jed S. Rakoff said. “But the history of this country and the history of the world is full of examples of good men who did bad things.”

  20. November 2013
    $1.2 Billion Fine for Cohen’s Hedge Fund

    Steven Cohen’s firm, SAC Capital Advisors, became the first large Wall Street firm in a generation to confess to criminal conduct. The government also forced SAC to terminate its business of managing money for outside investors.

    The government secured a series of guilty pleas by former SAC traders, but after more than a decade of poring over trading records, interviewing informants and issuing grand jury subpoenas, the district attorney’s office was not able to build a case against SAC’s billionaire owner.

  21. December 2014
    Appeals Court Overturns 2 Convictions

    A federal appeals court overturned two of the government’s signature convictions, the case against the former hedge fund traders Todd Newman and Anthony Chiasson, who were tried together. And in the process, the court rewrote the insider trading playbook, imposing the greatest limits on prosecutors in a generation.

    Citing the trial judge’s “erroneous” instructions to jurors, the court not only reversed the convictions but threw out the case altogether. The unanimous decision portends a partial unraveling of Mr. Bharara’s insider trading crackdown.

  22. May 2016
    Case Links Golfer, Banker and Gambler

    Phil Mickelson and Thomas Davis, a former investment banker, owed money to William Walters, a high-rolling Las Vegas kingmaker. Federal prosecutors in Manhattan say those debts were at the center of a long-running insider trading scheme.

    Mr. Mickelson was not accused of wrongdoing. But the S.E.C. listed him in a civil complaint as a relief defendant.

  23. December 2016
    Supreme Court Backs Prosecutors on Insider Trading

    The Supreme Court said that gifts of confidential information from business executives to relatives violate securities laws.