Providing Experienced Criminal Defense

On NFTs and insider trading: penalties and defenses

On Behalf of | May 8, 2023 | White-Collar Crimes |

The rise of NFTs, or non-fungible tokens, has opened up a new frontier for investing and trading unique digital assets. From digital representations of art, music, videos and other creative works, this new market has the potential to buy and sell NFTs for profit.

However, even though NFTs are not traditional securities, trading them still falls under the broader umbrella of securities markets. The principles of fairness and integrity still apply. And if traders use insider information or manipulate prices, they can still be charged with insider trading.

What is insider trading?

Insider trading is a serious white-collar crime that undermines the fairness and integrity of the securities markets. It is buying or selling securities based on information unavailable to the general public. There are three main types of insider trading:

  • Classic insider trading: corporate insider trading on material non-public information
  • Tipper-tippee liability: disclosing material non-public information to a third party, who then trades on the information
  • The misappropriation theory: trading information that a person owes a duty of trust and confidence to a source of non-public information, such as an employer or client

Insider trading can occur when corporate insiders, such as executives, directors or employees trade securities based on confidential information obtained during their duties.


Insider trading can result in both criminal and civil penalties. Criminal penalties may include fines and imprisonment. On the other hand, civil penalties may include monetary fines, disgorgement of profits and injunctive relief. The SEC can also bring enforcement actions against individuals and companies for insider trading. It can result in significant monetary penalties and restrictions on future trading activities.

Possible Defenses

There are several defenses that individuals can raise against insider trading charges. Some examples include lack of knowledge or intent, publicly available information and pre-existing plans to trade. However, these defenses can be complex and require a comprehensive understanding of the legal context governing insider trading. The success of these defenses may also depend on the specific facts of each case, so it is wise to seek legal advice when facing these charges.

It’s easy to get swayed when one has insider information that can translate into huge monetary gains. But just because trading NFTs and blockchains are not easily traced doesn’t mean it can’t. The fairness and integrity of securities markets also apply to NFT trading, and all participants are responsible for upholding these principles to ensure a fair and transparent market for all.