Courts often entertain insider-trading cases where individuals are accused of using material non-public information (MNPI) gathered from their employers to trade in other companies’ securities. See, e.g., SEC v. Huang, 684 F. App’x 167 (3d Cir. 2017) (unpub’d) (former employee at a large bank misused customers’ credit-card transaction data to guide trading in merchant companies’ securities).

While superficially similar, “shadow trading” is a distinct and novel theory of insider trading: the SEC accuses a defendant of deciding to purchase securities of one company based on MNPI about another company. A California district court recently allowed a case of shadow trading to go forward, seemingly for the first time. See SEC v. Panuwat, No. 21-06322 (N.D. Cal.).

‘SEC v. Panuwat’