|It is one thing to publicly trade on publicly known information; that is why companies 'go public.'|
But it is fraud to offer public securities, and receive the benefit of public offerings, but then trade based on non-public preferred information. That is fraud; that is forced association.
Psssst; we're being indicted tomorrow. Sell your stock today, because tomorrow it will be worth less.
In order to sell your stock today, someone needs to buy your stock today. You are knowingly foisting crap on someone. You are stealing from them, if you are trading publicly. It is one thing to assess the value of a stock based on publicly known data and trade on that assessment.
It is another thing to rig the deck.
Here is another example in Pennsylvania:
Psssst; the Commonwealth is about to approve go ahead on this 'fracking' thing. Go out and buy gas and mineral rights for pennies on the dollar, before the public knows about this.
Harrisburg made deals all over the state, trading on this inside information. People gave up their gas and mineral rights to cronies connected in some way to Harrisburg, not knowing the real value of those rights, which were about to go up massively because of legislative action known only to some.
Here is a variant:
John Hancock Venture Capital agrees to sell Company C back their class A stock at less than full liquidation value under the condition that Company C will not liquidate the company within X time (because that would be stealing discounted value from JHVC.) This allows JHVC to make money on their investment in getting COmpany C launched, and still return the class A stock to the company and allow it to remain in business, which is the intent of VC investment.
The CEO of Company C agrees, and the next day, moves to liquidate the company and make a killing. After all they now own all the classA stock and to Hell with JHVC.
The JHVC folks walk into the dissolution meeting with their lawyers, present their agreement, and sue the Company and CEO and any directors that went along with him in order to make an example out of them. They shake the money out of Company C and make it part of their suit, but leave the employees and products and building intact and barely in business.
This is a real example (Cyborg Corp, Newton, MA in the 80s) and was made a Harvard Business School case study of what not to do to venture capitalists...)
What I wonder is, how did JHVC know the CEO was going to do this? It was literally the next day...somebody dropped a dime no doubt about it.
This CEO is now a 'business consultant and mentor.' Swear to God.