What is Insider Trading? Understanding Insider Trading in the Crypto Market

1. What is Insider Trading?

Insider Trading refers to the act of buying or selling financial assets, including cryptocurrencies, based on non-public information that is not accessible to others. This information is typically known by individuals within a company, such as executives, senior employees, or other related parties.

2. Types of Insider Trading

Legal Insider Trading: Occurs when insiders trade the financial assets of their own company and register the transactions in advance with regulatory authorities. For example, a crypto project publicly announces its intention to buy or sell its tokens before executing the transactions.
Illegal Insider Trading: Involves trading based on non-public information to gain unfair profits. This practice is prohibited and can lead to criminal prosecution.

3. Legal Regulations on Insider Trading

In the United States: The Securities and Exchange Commission (SEC) is responsible for investigating and prosecuting insider trading cases. Individuals convicted may face up to 20 years in prison and fines up to $5 million.
In Vietnam: According to Clause 2, Article 12 of the 2019 Securities Law, insider trading can lead to criminal prosecution with a maximum penalty of 7 years in prison.

4. Challenges in the Crypto Market

Due to the decentralized and anonymous nature of blockchain, detecting and handling insider trading in the crypto market is challenging. Some countries and financial organizations are working to establish legal frameworks to monitor and address insider trading, aiming to protect investors and ensure market transparency.