Trump's tweet triggers insider trading debate amid tariff pause
In the United States, regulations allow for penalties related to insider trading. Recent actions by U.S. President Donald Trump have sparked a debate about potential violations of these regulations, noted Hubert Stojanowski, director of client investments at Dom Inwestycyjny Xelion.
On April 9, President Trump posted emphatically on social media: "THIS IS A GREAT TIME TO BUY!!!." He suggested that his followers purchase stocks. A few hours later, his administration announced a 90-day pause on imposing tariffs, maintaining only a 10% tariff on almost all countries and 145% tariffs targeting China.
This decision caused the S&P 500 index to rise sharply, as noted by the "New York Times," reaching its highest values since the economic recovery after the 2008 crisis.
- Based on these events, Donald Trump was accused of engaging in insider trading, - emphasized Stojanowski.
Trump involved in insider trading?
This involves using confidential information that is not publicly available. For instance, someone might have information about company X's financial results, set to be released in a few days, and know they will exceed expectations. Using this knowledge, they buy the stocks before the results are published, predicting a significant rise in stock value, explained the expert, describing the mechanism of insider trading.
Stojanowski pointed out that the situation is unusual because, by April 7, reports circulated in investment circles, supposedly from the White House, suggesting that tariffs would be paused. These reports were later denied.
These reports had a significant impact on stock prices at the New York Stock Exchange. On April 7, we observed a dynamic increase in stock prices, which fell after the reports were denied, - he noted.
Trump's April 9 post and the subsequent tariff pause announcement quickly drew reactions from opposition Democratic Party politicians. - How is this not market manipulation? – asked Congressman Mike Levin from California on social media. Democratic Senator Adam Schiff from the same state suggested that government information might have been used for market speculation. - Did anyone buy or sell stocks, and profit at the public’s expense? - wondered the politician.
On April 11, six leading Democratic Party senators, including Elizabeth Warren, Chuck Schumer, Ron Wyden, and Adam Schiff, sent a letter to the U.S. Securities and Exchange Commission (SEC).
In the letter, the politicians called for an investigation into the possible use of public information by individuals associated with the Trump administration and the president's family to manipulate the market. "Insiders may have known that he was going to announce a tariff pause and that the market would improve," the senators argued.
- Exactly the same information could be heard in investor circles on Monday, - noted Stojanowski regarding the Trump administration's April 9 announcement. He admitted that "it looked at least questionable."
He further stated, "I am not a lawyer, nor am I familiar with the U.S. legal system, so I cannot definitively determine whether the described situation constitutes insider trading since the post was public." - However, we are indeed dealing with something that may have signs of market manipulation, - assessed Stojanowski.
Millions of dollars in fines for insider trading
The expert also emphasized the situation's ethical implications. "From a purely ethical perspective, this scenario is troubling as it suggests an attempt to influence the market, potentially allowing certain individuals to benefit at the expense of others," noted the interviewer.
Meanwhile, Professor Kathleen Clark from Washington University, quoted by the NYT, stated, "If we still had a rule of law, a robust system for the rule of law, it would be investigated."
The White House, however, defended the president's actions. - It is the responsibility of the president of the United States to reassure the markets and Americans about their economic security, - emphasized Kush Desai, a spokesperson for the administration, in a conversation with the newspaper.
"In a statement, the S.E.C., which reviews possible violations of federal securities laws, declined to respond to questions about Mr. Trump’s post," reported the "NYT."
In the United States, individuals found guilty of insider trading can face up to 20 years in prison and a fine of up to $5 million, while companies can face fines of up to $25 million. Additionally, the SEC can impose financial penalties on entities engaging in insider trading of up to three times the profit gained or the loss avoided.
