Securities Fraud / Insider Trading

Organised market fraud dates to the South Sea Bubble in London in 1720; the first notorious criminal case was the Great Stock Exchange Fraud of 1814, in which Charles Random de Berenger spread false news of Napoleon's death to lift British government bond prices.

Market manipulation is as old as organised stock markets: the South Sea Bubble of 1720 and London's Great Stock Exchange Fraud of 1814, in which false news of Napoleon's death was spread to lift government bond prices, are early documented cases. Modern rules came after the 1929 crash, when the US Securities Act of 1933 and Securities Exchange Act of 1934 created the SEC and outlawed deceptive practices; the SEC's 1961 Cady, Roberts decision set out the modern ban on trading on inside information. Large accounting frauds (Enron 2001, WorldCom 2002, Wirecard 2020) showed that executives can falsify the books themselves, and rogue-trading losses at Barings (1995), Societe Generale (2008) and UBS (2011) showed how single traders could hide unauthorised positions. Today the same method includes crypto-token pump-and-dumps and social-media stock promotions.

Insiders or their contacts trade on confidential information, such as an upcoming merger or bad earnings, before the public knows. In accounting fraud, managers inflate revenue or hide debts so the company looks healthier than it is and the share price stays high. In rogue trading, an employee takes on unauthorised positions and hides losses with fake trades or booking tricks until they become too big to cover. In pump-and-dump schemes, promoters hype a thinly traded stock or token, then sell to the buyers they attracted.

For insiders the trade is almost free: a tip and a brokerage account, with returns limited only by position size, and for executives cooking the books can prop up a share price for years (Enron, WorldCom, Wirecard). Detection has improved with surveillance of unusual trading: the SEC obtained a record $8.2 billion in remedies in fiscal 2024 and $17.9 billion in fiscal 2025 (largely one crypto case), and insider-trading and manipulation actions rose in 2025 even as total cases fell (SEC, Apr 2026). Convictions require proving intent and material non-public information, which is why many cases end in civil settlements.

The biggest accounting frauds destroyed whole companies: Enron's collapse in 2001 wiped out about $74 billion of shareholder value and 20,000 jobs, and WorldCom's $11 billion fraud was then the largest US bankruptcy (US DOJ, 2005). Rogue trading cost Societe Generale EUR 4.9 billion in 2008, and Wirecard's collapse in 2020 left EUR 1.9 billion missing. Non-money harm includes lost pensions (Enron employees' retirement plans) and lasting damage to trust in audited accounts.